How about a student’s contract with your neighbour?

Economy University

Imagine you have a poor neighbour whose daughter is a bright high school student. Imagine that you have already decided to support her university education financially. Would you make a contract with her that requires her to find a job and work in the near after graduation?

If you are thinking through this situation you are thinking about why the Hungarian government wants to make a “student’s contract” with those whose education is financed by the taxpayers. Such a contract would require these students to stay in Hungary for a few years after graduation. Does it make sense?

The answer is that there is no answer until you can clearly tell the reason why you decided to finance the education of your neighbour’s daughter. One of the reasons may be pure altruism. In this case the contract does not make sense of course. Why give money in the first place if you take back a part of it in a different way?

A second reason may be that you want the girl to have a good job. Although this reason is hard to defend on economic grounds it does not seem to be different from the first reason from your point of view: giving her a good job is equivalent with giving her a sum of money.

A third reason may be your expectation that you will benefit from the education of that girl. After all it is better to live in a neighbourhood of engineers, physicians, and economists than in the neighbourhood of unemployed school drop-outs. This reason seems to make sense but I have some doubts. First, by accepting it you assume that these “spill over effects” of others’ education can only be realized if the educated stay in the near (in the country). This is not obvious. Why should those Hungarian youngsters who work in a foreign country not have beneficial effects on those who financed their education? Second, if this is the reason it is not clear why the government discriminate between fields of specialization. Does a physician have less spill over effects on others than an economist or a lawyer does? The latter two, too, (especially economists) are highly civilized and good neighbours.

In sum it seems that even if there are some (weak) reasons to make contracts with the tax-financed students they are applied inconsistently by the government. There are, I think, at least two reasons to explain that. The first is the reluctance of Hungarian political players to debate “big questions”. The big question here is why we (the taxpayers) should finance the education of our neighbour’s children. This question is not answered; it is not even raised.

The second is that the true reason may be to raise future tax revenue. That is, the government tells the students, “okay, you might find a better job in London or Vienna but at least you will pay taxes here. And we will have the money to spend on bridges to nowhere. The voters love such bridges and hate to think about spill over effects.”


Pál Czeglédi


Pál Czeglédi is an associate professor at Faculty of Economic and Business Administration, University of Debrecen.

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