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Public Expenditure on Education and Skill Formation: Is There a Simple Rule to Maximize Skills?

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  • Rossana Patron
  • Marcel Vaillant

Abstract

The ratio of skilled-to-unskilled labour stocks in the economy is widely acknowledged to have an important role for development. Can education policy affect the evolution of this ratio? This paper shows that it can: it also shows that the effect of education policy, for a given budget size, depends on the allocation rule across educational levels, particularly in the presence of systemic inefficiency. Using a stylized hierarchical education model, the theoretical conditions under which the allocation rule would favour the accumulation of skills are determined. The analysis has implication for policymakers in developing countries, where skill formation is much needed, because it shows that their allocation rules usually violate the maximization condition by assigning higher-than-optimal resources to higher education.

Suggested Citation

  • Rossana Patron & Marcel Vaillant, 2012. "Public Expenditure on Education and Skill Formation: Is There a Simple Rule to Maximize Skills?," Oxford Development Studies, Taylor & Francis Journals, vol. 40(2), pages 261-271, June.
    • Handle: RePEc:taf:oxdevs:v:40:y:2012:i:2:p:261-271
    DOI: 10.1080/13600818.2012.678323
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    References listed on IDEAS

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    Cited by:

    1. Dosmagambet, Yergali, 2015. "Optimal policy for secondary education in developing countries," PFH Forschungspapiere/Research Papers 2015/01, PFH Private University of Applied Sciences, Göttingen.
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    3. Vincenzo Prete & Claudio Zoli, 2019. "The political economy of educational policies and inequality of opportunity," Working Papers 2019:14, Department of Economics, University of Venice "Ca' Foscari".

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    More about this item

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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