Higher Education Financial Sources and Models: A Comparative Analysis in Selected EU Countries

Introduction

One of the global issues that decision-makers, economic policy-makers, and researchers around the world focus nowadays on relates to the problem and challenges of higher education funding. Diversifying sources and establishing an adequate funding model is important for a number of reasons. First of all, a high-quality and efficient higher education system is a prerequisite for increasing the human capital fund. Well-organized and stable higher education institutions are the basis for productivity growth, primarily through human capital accumulation. Increasing investment in new knowledge in all scientific fields and turning that knowledge into development is necessary not only to create a knowledge-based society but also to improve national competitiveness, quality of life of individuals and society, reduce disparities on the labor market, create social justice and cohesion. Higher education is the innovative basis of the economy and the only indisputable alternative to the country’s sustainable development. Therefore, in modern conditions, only an economy that values knowledge and innovation and invests adequate resources in innovation, research, and development can make progress.

In line with the above, the advancement of higher education is crucial to realizing Europe's ambition to become a world leader in the global knowledge economy. The Europe 2020 Strategy aims to support the further modernization of the higher education system and to enable higher education institutions, as generators of human capital accumulation and drivers of innovation development, to reach their full potential. In order to meet the demands of a modern knowledge-based economy, European countries need highly skilled people who possess not only specific defined competencies but also other types of skills (such as communication skills, flexibility and an entrepreneurial spirit) that will enable them to meet the needs of the modern labor market. At the same time, higher education institutions need to be able to fully assume the role of the carrier in the so-called “knowledge triangle” that involves the interaction of education, research and innovation.

It is well known that there are two main sources of higher education funding, public and private. Limited public funds, on the one hand, and the expansion of higher education, on the other, reduce budget allocation for higher education. To a large extent, the transformation of the forms and mechanisms of financing is influenced by the change in the nature and content of higher education in connection with the need for the formation of individual educational programs of education, diversification of their content, terms and forms of delivery of educational services to the consumer. Within private sources, in addition to tuition fees, there are alternative or external financial resources, or private funds that are not paid by individuals in the form of tuition or administrative fees. Faculties or departments get involved in research projects or organize special training for the economy and counselling in the field of economics and business, perform consulting services and obtain benefits from various educational programs aimed at non-traditional student population, rent space and equipment, in order to obtain additional funds.

Depending on which source of funding is dominant, the following general models of higher education funding are distinguished: European, American, British, and Japanese models. According to the European model, universities are mostly financed from the budget. In the case of the US model, funding is mainly provided through tuition and donations, while a smaller portion of funding comes from the federal budget or local government. The British model implies a significantly lower share of public higher education funding, compared to the European model, while in the case of the Japanese model, families play a key role in financing higher education.

Accordingly, the research subject are conceptual and qualitative aspects of different higher education funding models. According to the determined research subject, the objective of the paper is to evaluate trends in higher education funding using the example of EU countries and their comparative analysis, and to look at possible directions for improving higher education institution funding in the Republic of Serbia.

Taking into account the complexity of the mentioned issues, the qualitative methodology, based on the dominant application of analytical description and comparative analysis methods, is applied in the paper.