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A Model of Vertically Differenciated Education

  • Effinger, M.R.
  • Polborn, M.K.

We analyse the allocation of students who differ in their ability to two school types when there are peer effects (students learn more the better their classmates) and expected income after school depends also on the average productivity of peers. We derive the allocation under free school choice and decentralized determination of the academic level; we show that, compared to the social optimum, the level is suboptimal and to many students attend the better school type. A social planner can improve on the allocation under free school choice by prescribing a higher academic level.

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Paper provided by Toulouse - GREMAQ in its series Papers with number 97.469.

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Length: 15 pages
Date of creation: 1997
Date of revision:
Handle: RePEc:fth:gremaq:97.469
Contact details of provider: Postal: GREMAQ, Universite de Toulouse I Place Anatole France 31042 - Toulouse CEDEX France.
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  1. Betts, Julian R, 1998. "The Impact of Educational Standards on the Level and Distribution of Earnings," American Economic Review, American Economic Association, vol. 88(1), pages 266-75, March.
  2. Richard Arnott & John Rowse, 1982. "Peer Group Effects and Educational Attainment," Working Papers 497, Queen's University, Department of Economics.
  3. Henderson, Vernon & Mieszkowski, Peter & Sauvageau, Yvon, 1978. "Peer group effects and educational production functions," Journal of Public Economics, Elsevier, vol. 10(1), pages 97-106, August.
  4. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
  5. Laura M. Argys & Daniel I. Rees & Dominic J. Brewer, 1996. "Detracking America's schools: Equity at zero cost?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 15(4), pages 623-645.
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