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Public Education Spending, Sectoral Taxation, and Growth

Listed author(s):
  • Marion Davin

This paper examines the interplay between public education expenditure and economic growth in a two-sector model with manufactured goods and services. When public education is financed by sectoral taxes, the education policy maximizing the growth rate differs from that obtained by the standard unisectoral tax. The reasons for this are twofold. First, because agents’ preferences for services, human capital and savings become a major determinant of the relationship between growth and public education expenditure. Second, because education spending is a service and hence sectoral taxation creates a distortion by affecting its relative price. Finally, we reveal that a sectoral tax may perform better than a standard aggregate production tax in terms of long-term growth.

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Article provided by Dalloz in its journal Revue d'économie politique.

Volume (Year): 124 (2014)
Issue (Month): 4 ()
Pages: 553-570

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Handle: RePEc:cai:repdal:redp_244_0553
Contact details of provider: Web page: http://www.cairn.info/revue-d-economie-politique.htm

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  1. Andrés Erosa & Tatyana Koreshkova & Diego Restuccia, 2010. "How Important Is Human Capital? A Quantitative Theory Assessment of World Income Inequality," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1421-1449.
  2. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
  3. William F. Blankenau & Nicole B. Simpson & Marc Tomljanovich, 2007. "Public Education Expenditures, Taxation, and Growth: Linking Data to Theory," American Economic Review, American Economic Association, vol. 97(2), pages 393-397, May.
  4. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Relative Prices and Relative Prosperity," American Economic Review, American Economic Association, vol. 97(3), pages 562-585, June.
  5. Parantap Basu & JKeshab Bhattarai, 2012. "Government Bias in Education, Schooling Attainment, and Long-Run Growth," Southern Economic Journal, Southern Economic Association, vol. 79(1), pages 127-143, July.
  6. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-834, August.
  7. Blankenau, William F. & Simpson, Nicole B., 2004. "Public education expenditures and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 583-605, April.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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