This study focuses on the effects of financial crisis and local competition among academic institutions on the universities’ tuition fees level and variation. In our work, the financial crisis started in 2008 and competition are represented by the competitors’ proximity index, which measures the specific market pressure of each university compared to all other competitors, by adopting the sum of distances, weighted by the number of student enrolled at each university, from one institution to all others.
Our data show that, although the average tuition grows both in the period before crisis (2003-2008) and after crisis (2009-2014), the growth gets slower year by year after crisis. This is an apparently counterintuitive trend since after 2008 universities are capable of even less financial resources, probably due to the system’s efficiency searching. Such slow growth of the tuition fees is an indication of some other factors moderating the effect of financial crisis and keeping prices down. Such factor consists of local competition that measures the competitiveness of the area where the university acts. Attracting students has become a strategic lever of primary importance for universities, more important than the monetary remuneration. The results therefore show less price elasticity.
We therefore identify four main effects: (i) Substitution effect: the HE system receiving less public support (FFO) increases tuition fees at the aggregate level; (ii) Financial crisis effect: the financial crisis led universities to charge a higher average level of tuition per student. This is because after crisis the public funds (FFO) has been further reduced, accentuating the substitution effect of the FFO with the tuition; (ii) Competition effect: after crisis the universities under competition observe an inferior growth in their tuition fees with the aim of attracting more students; (iv) Saturation effect: public universities revise year by year the maximum tuition threshold. Universities charging high levels of tuition fees over time tend to increase them less.