This paper analyzes public intervention in education, taking into account the existence of two educational levels: basic education and college education. The government decides per capita expenditure at each level and the subsidy for college education. We explore the effects of transferring resources from one level to the other on equity and efficiency, where efficiency refers to average productivity of college graduates. Except in the special case in which the economy is at the Equity-Efficiency Frontier (EEF), there is always a policy reform that increases the productivity of college graduates without excluding the talented poor from college. For developed countries, this policy consists of transferring resources from college to basic education.
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number
2009-18.
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 J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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