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Government Expenditure on the Public Education System

Author

Listed:
  • Chao Fu
  • Shoya Ishimaru
  • John Kennan

Abstract

We investigate equilibrium impacts of federal policies such as free‐college proposals, taking into account that human capital is cumulative and that state governments have resource constraints. In our model, a state government cares about household welfare and aggregate educational attainment. The government chooses income tax rates, per‐student expenditures on K‐12 and college education, college tuition, and the provision of other public goods. We estimate the model using U.S. data. Our simulations suggest that free‐college policies would decrease state expenditure on education. More students would obtain college degrees. Most households would “pay” for the free‐college policies through negative welfare effects.

Suggested Citation

  • Chao Fu & Shoya Ishimaru & John Kennan, 2024. "Government Expenditure on the Public Education System," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 43-73, February.
    • Handle: RePEc:wly:iecrev:v:65:y:2024:i:1:p:43-73
    DOI: 10.1111/iere.12659
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    References listed on IDEAS

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    1. Elizabeth M. Caucutt & Lance Lochner, 2020. "Early and Late Human Capital Investments, Borrowing Constraints, and the Family," Journal of Political Economy, University of Chicago Press, vol. 128(3), pages 1065-1147.
    2. John Kennan, 2015. "Spatial Variation in Higher Education Financing and the Supply of College Graduates," NBER Working Papers 21065, National Bureau of Economic Research, Inc.
    3. Susan M. Dynarski, 2003. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," American Economic Review, American Economic Association, vol. 93(1), pages 279-288, March.
    4. Richard Murphy & Judith Scott-Clayton & Gill Wyness, 2017. "The end of free college in England," CentrePiece - The magazine for economic performance 503, Centre for Economic Performance, LSE.
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    Cited by:

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    2. Uta Bolt & Eric French & Jamie Hentall Maccuish & Cormac O’Dea, 2018. "Intergenerational Altruism and Transfers of Time and Money: A Life-cycle Perspective," Working Papers wp379, University of Michigan, Michigan Retirement Research Center.
    3. Ruhr, Lindsay R. & Jordan Fowler, Lindsey, 2022. "Empowerment-focused positive youth development programming for underprivileged youth in the Southern U.S.: A qualitative evaluation," Children and Youth Services Review, Elsevier, vol. 143(C).

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    More about this item

    JEL classification:

    • I00 - Health, Education, and Welfare - - General - - - General
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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