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Public expenditure on education and skill formation: are there simple rules to maximise skills?

In: Investigaciones de Economía de la Educación 6

  • Rossana Patron

    ()

    (Universidad de la Republica)

  • Marcel Vaillant

    ()

    (Universidad de la Republica)

The ratio of skill to unskilled labour stocks in the economy is widely acknowledged to have an important role for development. Can education policy do anything to affect the evolution of this ratio? This paper shows that it can, and it also shows that the actual effect of education policy depends on the allocation rule of the budget across educational levels. The consideration of a stylised hierarchical education model allows us to develop analytical conditions under which the allocation rule favours the accumulation of skills. The analysis has implication for policy makers in developing countries, where skill formation is much needed, as it shows that observed allocation rules usually violate the maximisation condition by the assignment of higher than optimal resources to higher education.

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This chapter was published in:
  • Antonio Caparrós Ruiz (ed.), 2011. "Investigaciones de Economía de la Educación," E-books Investigaciones de Economía de la Educación, Asociación de Economía de la Educación, edition 1, volume 6, number 06, November.
  • This item is provided by Asociación de Economía de la Educación in its series Investigaciones de Economía de la Educación volume 6 with number 06-23.
    Handle: RePEc:aec:ieed06:06-23
    Contact details of provider: Web page: http://www.economicsofeducation.com

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    1. Driskill, Robert A & Horowitz, Andrew W, 2002. "Investment in Hierarchical Human Capital," Review of Development Economics, Wiley Blackwell, vol. 6(1), pages 48-58, February.
    2. Chris Papageorgiou, 2003. "Distinguishing Between the Effects of Primary and Post-primary Education on Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 7(4), pages 622-635, November.
    3. Robert Driskill & Andrew W. Horowitz & Fabio Méndez, 2009. "Hierarchical Human Capital and Economic Growth: Theory and Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(4), pages 723-743, December.
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