Private Versus Public Financing Of Education And Endogenous Growth
HWWA - Hamburg Institute of International Economics
European Central Bank (ECB)
Journal of Population Economics, Vol. 13, No. 3, 2000
This paper examines interactions between education policy and growth. The analysis is carried out in an OLG model with two types of individuals: skilled and unskilled. An increase in public education reduces private costs of education, increases the proportion of skilled individuals, and tends to promote growth. On the other hand, education spending crowds out physical capital and reduces learning-by-doing. A marginal increase in the education subsidy can lower growth. It is yet shown that pure public education maximizes the long-run growth rate. Importantly, a partial subsidy to education can result in lower growth than pure private education.
Key words: Growth, education, inequality, overlapping generations
JEL Classification: E10, O40, O41, F43Accepted Paper Series
Date posted: October 18, 2000
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