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The Pitfalls of Regional Education Policy

  • Jens Südekum

We analyze whether education subsidies to students in poor areas are an effective tool of regional policy. We show that this policy can miss its objectives and actually hurt instead of help the recipient area. The reason is that geographical mobility increases with the personal skill level. Education subsidies induce individuals to invest more heavily in human capital. At the end of the education period they might have crossed some threshold level of qualification beyond which emigration to the economic center pays off. Regional policies then result in a brain drain that is harmful to those remaining in the periphery. Education subsidies are a more promising policy instrument the lower is labor mobility and the better is access to financial markets. Moreover, policymakers can avoid the potential pitfalls of this policy by focusing subsidies on low-skilled workers.

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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 61 (2005)
Issue (Month): 3 (November)
Pages: 327-

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200511)61:3_327:tporep_2.0.tx_2-l
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  1. Panu Poutvaara, 2004. "Public Education in an Integrated Europe: Studying to Migrate and Teaching to Stay?," CESifo Working Paper Series 1369, CESifo Group Munich.
  2. S. Ederveen & H.L.F. de Groot & R. Nahuis, 2003. "Fertile Soil for Structural Funds? A panel data analysis of the conditional effectiveness of European cohesion policy," Working Papers 03-14, Utrecht School of Economics.
  3. Mariassunta Giannetti, 2001. "Skill Complementarities and Migration Decisions," LABOUR, CEIS, vol. 15(1), pages 1-31, 03.
  4. Panu Poutvaara, 2000. "Education, Mobility of Labour and Tax Competition," International Tax and Public Finance, Springer, vol. 7(6), pages 699-719, December.
  5. Jennifer Hunt, 2000. "Why Do People Still Live in East Germany?," Discussion Papers of DIW Berlin 201, DIW Berlin, German Institute for Economic Research.
  6. Nicola D. Coniglio & Francesco Prota, 2003. "Human Capital Accumulation and Migration in a Peripheral EU Region: the Case of Basilicata," ERSA conference papers ersa03p157, European Regional Science Association.
  7. John Bound & Jeffrey Groen & Gabor Kezdi & Sarah Turner, 2001. "Trade in University Training: Cross-State Variation in the Production and Use of College-Educated Labor," NBER Working Papers 8555, National Bureau of Economic Research, Inc.
  8. Karen Helene Midelfart-Knarvik & Henry G. Overman, 2002. "Delocation and European integration: is structural spending justified?," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 321-359, October.
  9. Möller, Joachim & Haas, Anette, 2002. "The agglomeration wage differential reconsidered - an investigation with German micro data 1984-1997," ERSA conference papers ersa02p327, European Regional Science Association.
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