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Lobbying for Education in a Two-sector Model

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  • Debora Di Gioacchino
  • Paolo Profeta

Abstract

Modern economies devote a relevant share of their resources to education. However, even among industrialised countries, there are di􀀞erences in the traits of the education system and in its outcome in terms of human capital composition. The question we pose in this paper is why the composition of human capital is so diversified. The answer we propose is that the education system responds to the economy’’s structure of production. Skills are required by firms according to their needs and are supplied through the education system. We analyse the political economy of education in a two-period model in which heterogeneous firms, specialised in two di􀀞erent sectors, try to induce the government to finance the type of education which is complementary to their production. In the first period, the policy-maker decides the skill composition of new-workers which will determine the supply of skills in the second period. Firms may lobby to obtain their preferred skill composition. We show that in the political equilibr um in which firms in both sectors get organised, the policy-maker chooses the same skill composition that would be chosen by the social planner. Moving to endogenous lobbying, we are able to show that, if there are no costs of lobbying, then both sectors will lobby in equilibrium. However, in the more realistic case in which if lobbying is costly it may be that only one sector will find it profitable to offer monetary contribution; which sector gets organised depends on sectors’’ share in total output, relative productivity and prices of the two sectors.

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Bibliographic Info

Paper provided by University of Rome La Sapienza, Department of Public Economics in its series Working Papers with number 138.

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Length: 33
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:sap:wpaper:wp138

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Keywords: Endogenous lobbying; human capital composition; structure of production.;

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  1. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  2. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  3. Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Entry and asymmetric lobbying: why governments pick losers," LSE Research Online Documents on Economics 19726, London School of Economics and Political Science, LSE Library.
  4. Felli, Leonardo & Merlo, Antonio, 2002. "Endogenous Lobbying," CEPR Discussion Papers 3174, C.E.P.R. Discussion Papers.
  5. Graziella Bertocchi and Michael Spagat, 2001. "The Evolution of Modern Educational Systems," Royal Holloway, University of London: Discussion Papers in Economics 01/4, Department of Economics, Royal Holloway University of London, revised Sep 2001.
  6. Oded Galor & Omer Moav, 2006. "Das Human-Kapital: A Theory of the Demise of the Class Structure," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 85-117.
  7. Oded Galor & Omer Moav, 2000. "Das Human Kapital," Working Papers 2000-17, Brown University, Department of Economics.
  8. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 265-86, April.
  9. repec:ags:afjare:141665 is not listed on IDEAS
  10. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 503-30, May.
  11. Di Gioacchino, Debora & Sabani, Laura, 2009. "Education policy and inequality: A political economy approach," European Journal of Political Economy, Elsevier, vol. 25(4), pages 463-478, December.
  12. Jérôme Vandenbussche & Philippe Aghion & Costas Meghir, 2006. "Growth, distance to frontier and composition of human capital," Journal of Economic Growth, Springer, vol. 11(2), pages 97-127, June.
  13. Alstadsæter, Annette & Kolm, Anne-Sofie & Larsen, Birthe, 2005. "Money or Joy," Working Papers 23-2005, Copenhagen Business School, Department of Economics.
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