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Why Should State Government Invest in College Education? An Equilibrium Approach for the US in 2000

  • Shields, Michael P.

    ()

    (Central Michigan University)

This paper is a preliminary look at the benefits to states in the US of subsidizing college education. The benefits studies are the external benefits of college education on the earnings of both college graduates and those who have not graduated from college. In completing a college education individuals earn more. In addition, if there are positive external benefits others will also earn more because the average level of college graduates in the state has risen. This study confirms the existence of these positive externalities for the US in 2000 in estimates using the Current Population Survey. Furthermore, these external benefits are large enough that if confirmed in more complete studies would suggest that states invest too little in college education.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3569.

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Length: 20 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3569
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  1. Michael Shields & Gail Shields, 2009. "Estimating external returns to education in the US: a production function approach," Applied Economics Letters, Taylor & Francis Journals, vol. 16(11), pages 1089-1092.
  2. Daron Acemoglu & Joshua Angrist, 2001. "How Large are Human-Capital Externalities? Evidence from Compulsory-Schooling Laws," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 9-74 National Bureau of Economic Research, Inc.
  3. Aly, Hassan Y. & Shields, Michael P., 1999. "Privatization and surplus labor in the Egyptian textile industry," Economics Letters, Elsevier, vol. 63(2), pages 187-191, May.
  4. James E. Rauch, 1991. "Productivity Gains From Geographic Concentration of human Capital: Evidence From the Cities," NBER Working Papers 3905, National Bureau of Economic Research, Inc.
  5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  6. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
  7. Schultz, T. Paul, 1988. "Education investments and returns," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 13, pages 543-630 Elsevier.
  8. Winter-Ebmer, Rudolf, 1992. "Endogenous Growth, Human Capital, and Industry Wages," CEPR Discussion Papers 714, C.E.P.R. Discussion Papers.
  9. Yongil Jeon & Michael P. Shields, 2005. "Integration And Utilization Of Public Education Resources In Remote And Homogenous Areas: A Case Study Of The Upper Peninsula Of Michigan," Contemporary Economic Policy, Western Economic Association International, vol. 23(4), pages 601-614, October.
  10. Roback, Jennifer, 1988. "Wages, Rents, and Amenities: Differences among Workers and Regions," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 23-41, January.
  11. Groen, J.A.Jeffrey A., 2004. "The effect of college location on migration of college-educated labor," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 125-142.
  12. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  13. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
  14. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
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