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Can more education be bad? Some simple analytics on financing education

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  • Rossana Patrón

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

The evidence of effects of education activities on growth is mixed. So, could education be good, neutral, or bad, depending on the case? While the model in this paper remains close to the Heckscher-Ohlin tradition, it is shown that, contrary to the standard results, it is the net effect of prices, taxation, and accumulation of endowments that determines the Rybczynski-type growth effects, which may help explain the lack of consensus in the empirical literature on education and growth. A central feature of the model is that the accumulation of endowments depends on the output of education, while the changes in labour supply, which determine the effective production possibilities frontier, also depend on individuals’ decisions on allocation of time. In the paper, the risks of a labour supplyreducing government intervention are discussed. The analysis has implications for policymakers in developing countries where education needs to be enhanced, as it reveals the possibility of a ‘bad tax reform’ where the intentions of reformers are not met by the results. A sufficient condition to avoid this situation is identified in the paper.

Suggested Citation

  • Rossana Patrón, 2009. "Can more education be bad? Some simple analytics on financing education," Documentos de Trabajo (working papers) 1709, Department of Economics - dECON.
  • Handle: RePEc:ude:wpaper:1709
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    File URL: http://cienciassociales.edu.uy/departamentodeeconomia/wp-content/uploads/sites/2/2013/archivos/1709.pdf
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Jonathan Temple, 2003. "Growth effects of education and social capital in the OECD countries," OECD Economic Studies, OECD Publishing, vol. 2001(2), pages 57-101.
    3. Gerhard Glomm & B. Ravikumar, 1998. "Flat-Rate Taxes, Government Spending on Education, and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 306-325, January.
    4. William F. Blankenau & Nicole B. Simpson & Marc Tomljanovich, 2007. "Public Education Expenditures, Taxation, and Growth: Linking Data to Theory," American Economic Review, American Economic Association, vol. 97(2), pages 393-397, May.
    5. Benedict J. Clements, 1999. "The Efficiency of Education Expenditure in Portugal," IMF Working Papers 99/179, International Monetary Fund.
    6. Eric A. Hanushek, 1979. "Conceptual and Empirical Issues in the Estimation of Educational Production Functions," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 351-388.
    7. Hanushek, Eric A., 2002. "Publicly provided education," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 30, pages 2045-2141 Elsevier.
    8. Eric A. Hanushek, 2004. "Some Simple Analytics of School Quality," NBER Working Papers 10229, National Bureau of Economic Research, Inc.
    9. Blankenau, William F. & Simpson, Nicole B., 2004. "Public education expenditures and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 583-605, April.
    10. Rosalind Levacic & Anna Vignoles, 2002. "Researching the Links between School Resources and Student Outcomes in the UK: A Review of Issues and Evidence," Education Economics, Taylor & Francis Journals, vol. 10(3), pages 313-331.
    11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Is education bad for growth?
      by Economic Logician in Economic Logic on 2009-12-17 08:45:00

    More about this item

    Keywords

    education; fiscal policy; developing countries;

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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