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(Mis-)Understanding Education Externalities

  • Mueller, Normann
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    This article critically evaluates the current state of research on education externalities. It occurs that much of the confusion regarding their magnitude results from conceptual misunderstandings pertaining to their nature. The essay distinguishes the concepts education, teaching, and knowledge. Whereas pure teaching yields externalities on the primary and secondary level, only the generation of knowledge may produce the spillovers which are typically linked to the tertiary level. The accumulation of education itself does not have such an effect. Education is argued to be a private good with well defined property rights. Individuals may exploit those and provide the production sector with the efficient amount of human capital. Following this rationale, it is demonstrated that empirical studies, contrasting estimations of private and social returns to education, are unsuitable to substantiate the existence of externalities. As a consequence, subsidies to tertiary programs are called into question.

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    File URL: http://mpra.ub.uni-muenchen.de/5331/1/MPRA_paper_5331.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5331.

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    Date of creation: Mar 2007
    Date of revision: Mar 2007
    Handle: RePEc:pra:mprapa:5331
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    8. Jeremy Rudd, 2000. "Empirical evidence on human capital spillovers," Finance and Economics Discussion Series 2000-46, Board of Governors of the Federal Reserve System (U.S.).
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    11. 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.
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    28. repec:cup:cbooks:9780521894753 is not listed on IDEAS
    29. Alexander Muravyev, 2006. "Human Capital Externalities: Evidence from the Transition Economy of Russia," Discussion Papers of DIW Berlin 629, DIW Berlin, German Institute for Economic Research.
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