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(Mis-)Understanding Education Externalities

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  • Mueller, Normann

Abstract

This article reviews the current state of research on education externalities. It finds that much of the confusion regarding their magnitude results from conceptual misunderstandings about their nature. The concepts of 'education', 'teaching', and 'knowledge' need to be distinguished for a better understanding. 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 estimates 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 6307.

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Date of creation: Nov 2007
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Handle: RePEc:pra:mprapa:6307

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Related research

Keywords: Public education finance; Education expenditures; Human capital externalities; Property rights; Endogenous economic growth; Private and social return to education;

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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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