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Public Education Expenditure, Growth and Welfare

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Author Info
Konstantinos Angelopoulos ()
Jim Malley ()
Apostolis Philippopoulos ()

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Abstract

In this paper we study the quantitative macroeconomic effects of public education spending in USA for the post-war period. Using comparable measures of human and physical capital, from Jorgenson and Fraumeni (1989, 1992a,b), we calibrate a standard dynamic general equilibrium model where human capital is the engine of long-run endogenous growth and government education spending is justified by externalities in human capital. Our base calibration, based on moderate sized human capital externalities, suggests that public spending on education is both growth and welfare promoting. However, given that public education spending crowds-out private consumption, the welfare maximising size of the government is less than the growth maximising one. Our results further suggest that welfare gains, as high as four percent of consumption, are obtainable if the composition of public spending can be altered in favour of education spending relative to the other components of total government spending.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2037.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2037

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Find related papers by JEL classification:
H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
I28 - Health, Education, and Welfare - - Education - - - Government Policy
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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