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Public Spending on Education and the Incentives for Student Achievement

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  • WILLIAM BLANKENAU
  • GABRIELE CAMERA

Abstract

We build a model where homogeneous workers can accumulate human capital by investing in education. Schools combine public resources and individual effort to generate productive skills. If skills are imperfectly compensated, then in equilibrium students may under-invest in effort. We examine the effect on human capital accumulation of three basic education finance policies. Increased tuition subsidies may not be beneficial because they increase enrolment but they may lower the incentives for student achievement, hence the skill level. Policies directed at enhancing the productivity of education or making degrees more informative are more successful at improving educational outcomes. Copyright (c) The London School of Economics and Political Science 2008.

Suggested Citation

  • William Blankenau & Gabriele Camera, 2009. "Public Spending on Education and the Incentives for Student Achievement," Economica, London School of Economics and Political Science, vol. 76(303), pages 505-527, July.
  • Handle: RePEc:bla:econom:v:76:y:2009:i:303:p:505-527
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    References listed on IDEAS

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    Cited by:

    1. Yamamura, Eiji, 2011. "The role of social trust in reducing long-term truancy and forming human capital in Japan," Economics of Education Review, Elsevier, vol. 30(2), pages 380-389, April.
    2. repec:eee:ecmode:v:68:y:2018:i:c:p:425-434 is not listed on IDEAS
    3. Concetta Mendolicchio & Dimitri Paolini & Tito Pietra, 2014. "Income Taxes, Subsidies to Education, and Investments in Human Capital," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 24-47, February.
    4. Muhammad Baqir Abdullah & Mukaramah Harun & Mohd Razani Mohd Jali, 2017. "Employment Generated by Government Spending on Education," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(2), pages 738-742, February.
    5. Bidner, Chris, 2010. "Pre-match investment with frictions," Games and Economic Behavior, Elsevier, vol. 68(1), pages 23-34, January.
    6. Pierre-Richard Agénor, 2016. "Aid Volatility, Human Capital, and Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 219, Economics, The Univeristy of Manchester.
    7. Yamamura, Eiji, 2010. "Public spending on education: Its impact on students skipping classes and completing school," MPRA Paper 23657, University Library of Munich, Germany.
    8. Blankenau, William F. & Gao, Yuan, 2014. "Admission standards, student effort, and the creation of skilled jobs," Economic Modelling, Elsevier, vol. 43(C), pages 209-216.
    9. Maria Marta Ferreyra, 2010. "Information Asymmetry and Equilibrium Monitoring in Education," 2010 Meeting Papers 1215, Society for Economic Dynamics.
    10. Abdel-Rahman, Alaa & Fuller, David, 2014. "Education and employment in Egypt: the policies, discrepancies and possible solutions," MPRA Paper 67571, University Library of Munich, Germany.
    11. repec:bpj:jossai:v:3:y:2015:i:3:p:193-213:n:1 is not listed on IDEAS
    12. Masashi Tanaka, 2013. "Human capital investment, Signaling, and Wage differentials," Discussion Papers in Economics and Business 13-31, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    13. William Blankenau & Gabriele Camera, 2006. "A Simple Economic Theory of Skill Accumulation and Schooling Decisions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 93-115, January.
    14. Mendolicchio, Concetta & Paolini, Dimitri & Pietra, Tito, 2009. "Income tax, subsidies to education, and investments in human capital in a two-sector economy," MPRA Paper 14772, University Library of Munich, Germany.

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