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(Mis-)Understanding Education Externalities

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  • Mueller, Normann
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    Abstract

    This article critically evaluates the current state of research on education externalities. It occurs that much of the confusion regarding their magnitude results from conceptual misunderstandings pertaining to their nature. The essay distinguishes the concepts education, teaching, and knowledge. Whereas pure teaching yields externalities on the primary and secondary level, only the generation of knowledge may produce the spillovers which are typically linked to the tertiary level. The accumulation of education itself does not have such an effect. Education is argued to be a private good with well defined property rights. Individuals may exploit those and provide the production sector with the efficient amount of human capital. Following this rationale, it is demonstrated that empirical studies, contrasting estimations of private and social returns to education, are unsuitable to substantiate the existence of externalities. As a consequence, subsidies to tertiary programs are called into question.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5331.

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    Date of creation: Mar 2007
    Date of revision: Mar 2007
    Handle: RePEc:pra:mprapa:5331

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    Related research

    Keywords: Public education finance; Education expenditures; Human capital externalities; Property rights; Endogenous economic growth; Private return; Social return; Public goods;

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    Cited by:
    1. Tambovtsev, V., 2012. "Reasons for Baumol’s Cost Disease: Low Productivity or Cultural Stereotypes?," Journal of the New Economic Association, New Economic Association, vol. 14(2), pages 132-134.

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