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URI permanente desta comunidadehttps://repositorio.insper.edu.br/handle/11224/3242
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Tese Optimal Subsidies in Capacity-Constrained Essential Services(2025) Botelho, Vinícius de OliveiraThe public provision in mixed markets for essential services, like education, health, and childcare, is typically subsidized to increase take-up despite being often capacity-constrained. However, subsidizing a capacity-constrained option does not increase access unless subsidies reduce private prices or the crowding out of the private alternatives (through consumer sorting). If these equilibrium effects are absent, maximizing access may require reallocating resources currently used to subsidize the public option toward other strategies, such as expanding public firm capacity or subsidizing private supply. This paper focuses on the optimal combination of subsidies between private and public firms, keeping capacity fixed. We estimate a structural supply and demand model for the Brazilian higher education market, where private firms compete with a high-quality, free, and capacity-constrained public provision. We show that subsidizing the public option when it is capacity-constrained increases the crowding out of private schools but reduces private prices. The private price reduction could make the subsidies to capacityconstrained providers increase access; nevertheless, we show that implementing a reform that slightly increases the monthly tuition for public degrees and provides a budget-neutral unconditional scholarship reduces excess demand in public schools and increases enrollment, consumer surplus, and profits.