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Composition of Government Expenditures and Demand for Education in Developing Countries

  • John Matovu
  • Era Dabla-Norris
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    This paper addresses the potential effects on human capital accumulation and economic growth of the alternative compositions of public expenditures in the context of a computable dynamic general equilibrium model of overlapping generations and heterogeneous agents in which altruistic parents make schooling decisions for their children. In the presence of fixed and variable costs for different levels of schooling, we show that reducing household costs of primary education has the largest positive impact on growth and poverty reduction in the short run. Moreover, an increase in higher education spending increases long-run growth. These effects can be substantial even when increasing education spending comes at the expense of public infrastructure investment.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=15733
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/78.

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    Length: 47
    Date of creation: 01 May 2002
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/78
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    1. Psacharopoulos, George, 1993. "Returns to investment in education : a global update," Policy Research Working Paper Series 1067, The World Bank.
    2. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
    3. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
    4. James Davies & John Whalley, 1989. "Taxes and Capital Formation: How Important is Human Capital?," NBER Working Papers 2899, National Bureau of Economic Research, Inc.
    5. James J. Heckman, 1999. "Accounting for Heterogeneity, Diversity, and General Equilibriumin Evaluating Social Programs," NBER Working Papers 7230, National Bureau of Economic Research, Inc.
    6. Eric A. Hanushek & Dongwook Kim, 1995. "Schooling, Labor Force Quality, and Economic Growth," NBER Working Papers 5399, National Bureau of Economic Research, Inc.
    7. Verner, Dorte, 1999. "Wage and productivity gaps - evidence from Ghana," Policy Research Working Paper Series 2168, The World Bank.
    8. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
    9. Susan M. Collins & Barry P. Bosworth, 1996. "Economic Growth in East Asia: Accumulation versus Assimilation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 135-204.
    10. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
    11. Canagarajah, Sudharshan & Coulombe, Harold, 1997. "Child labor and schooling in Ghana," Policy Research Working Paper Series 1844, The World Bank.
    12. Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-50, April.
    13. Sawada, Yasayuki & Lokshin, Michael, 2001. "Household schooling decisions in rural Pakistan," Policy Research Working Paper Series 2541, The World Bank.
    14. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
    15. Judson, Ruth, 1998. " Economic Growth and Investment in Education: How Allocation Matters," Journal of Economic Growth, Springer, vol. 3(4), pages 337-59, December.
    16. Glomm, Gerhard, 1997. "Parental choice of human capital investment," Journal of Development Economics, Elsevier, vol. 53(1), pages 99-114, June.
    17. Glewwe, Paul, 1996. "The relevance of standard estimates of rates of return to schooling for education policy: A critical assessment," Journal of Development Economics, Elsevier, vol. 51(2), pages 267-290, December.
    18. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-46, December.
    19. Jacoby, Hanan G & Skoufias, Emmanuel, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 311-35, July.
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