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A model of vertically differentiated education

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  • Matthias Effinger
  • Mattias Polborn

Abstract

We analyse the allocation of students who differ in their ability to two school types when there are peer effects (students learn more the better their classmates) and expected income after school depends also on the average productivity of peers. We derive the allocation under free school choice and decentralized determination of the academic level; we show that, compared to the social optimum, the level is suboptimal and to many students attend the better school type. A social planner can improve on the allocation under free school choice by prescribing a higher academic level.
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Suggested Citation

  • Matthias Effinger & Mattias Polborn, 1999. "A model of vertically differentiated education," Journal of Economics, Springer, vol. 69(1), pages 53-69, February.
    • Handle: RePEc:kap:jeczfn:v:69:y:1999:i:1:p:53-69
    DOI: 10.1007/BF01231211
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    References listed on IDEAS

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    1. Arnott, Richard & Rowse, John, 1987. "Peer group effects and educational attainment," Journal of Public Economics, Elsevier, vol. 32(3), pages 287-305, April.
    2. Betts, Julian R, 1998. "The Impact of Educational Standards on the Level and Distribution of Earnings," American Economic Review, American Economic Association, vol. 88(1), pages 266-275, March.
    3. Henderson, Vernon & Mieszkowski, Peter & Sauvageau, Yvon, 1978. "Peer group effects and educational production functions," Journal of Public Economics, Elsevier, vol. 10(1), pages 97-106, August.
    4. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-459, June.
    5. Laura M. Argys & Daniel I. Rees & Dominic J. Brewer, 1996. "Detracking America's schools: Equity at zero cost?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 15(4), pages 623-645.
    6. Betts, Julian R. & Shkolnik, Jamie L., 1999. "The effects of ability grouping on student achievement and resource allocation in secondary schools," Economics of Education Review, Elsevier, vol. 19(1), pages 1-15, February.
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    Citations

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    Cited by:

    1. Jean-Luc Demeulemeester & Olivier Debande, 2008. "Quality and Variety Competition in Higher Education," Working Papers 08-10, Association Française de Cliométrie (AFC).
    2. Hendrik Jürges & Wolfram F. Richter & Kerstin Schneider, 2005. "Teacher Quality and Incentives: Theoretical and Empirical Effects of Standards on Teacher Quality," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(3), pages 298-326, November.
    3. Kangoh Lee, 2015. "Higher education expansion, tracking, and student effort," Journal of Economics, Springer, vol. 114(1), pages 1-22, January.
    4. Volker Meier & Gabriela Schütz, 2007. "The Economics of Tracking and Non-Tracking," ifo Working Paper Series 50, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Jürges, Hendrik & Schneider, Kerstin & Senkbeil, Martin & Carstensen, Claus H., 2012. "Assessment drives learning: The effect of central exit exams on curricular knowledge and mathematical literacy," Economics of Education Review, Elsevier, vol. 31(1), pages 56-65.
    6. Berardino Cesi & Dimitri Paolini, 2014. "Peer Group and Distance: When Widening University Participation is Better," Manchester School, University of Manchester, vol. 82, pages 110-132, December.
    7. Uschi Backes-Gellner & Stephan Veen, 2006. "Incentives for Schools, Educational Signals and Labour Market Outcomes," Economics of Education Working Paper Series 0009, University of Zurich, Department of Business Administration (IBW), revised Jun 2006.
    8. Hendrik Jürges & Kerstin Schneider, 2010. "Central exit examinations increase performance... but take the fun out of mathematics," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 497-517, March.
    9. Mayer-Foulkes, David, 2002. "On the dynamics of quality student enrollment at institutions of higher education," Economics of Education Review, Elsevier, vol. 21(5), pages 481-489, October.
    10. Volker Meier, 2000. "Choosing Between School Systems," CESifo Working Paper Series 389, CESifo.

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    More about this item

    Keywords

    education; externalities; vertical differentiation; decentralization; D62; I20;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • I20 - Health, Education, and Welfare - - Education - - - General

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