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Education Policies and Economic Growth

  • Nikos Benos

This paper studies the general equilibrium implications of two types of education policy in an overlapping generations growth model with second-best policy. We examine vouchers, which augment inherited private education spending, and public investment on economy-wide human capital, that provides economy-wide externalities to individual human capital accumulation. The government determines jointly the allocation of tax revenues among the two types of education policy and tax policy, subject to the competitive decentralized equilibrium. Using plausible parameter values it is shown that it is socially optimal to spend heavily on economy-wide human capital accumulation and finance government spending by a modest proportional tax on initial human capital and a low tax on inherited private education expenditures.

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File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/4-2004.pdf
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Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 4-2004.

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Length: 32 pages
Date of creation: Jul 2004
Date of revision:
Handle: RePEc:ucy:cypeua:4-2004
Contact details of provider: Web page: http://www.ucy.ac.cy/econ/en

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