Demographic Change and Public Education Spending: A Conflict between Young and Old?

Abstract

Demographic change in industrial countries will influence educational spending in potentially two ways. On the one hand, the decline in the number of school-age children should alleviate the financial pressure. On the other hand, the theoretical/empirical literature has established that the concomitantly increasing proportion of elderly in the population can influence the propensity of politicians to spend on education. Using a panel of the Swiss Cantons for the period from 1990 to 2002, we find that the education system has exhibited little elasticity in adjusting to changes in the school-age population, and that the share of the elderly population has a significantly negative influence on the willingness to spend on public education.

Keywords: public finance, education finance, demographics, panel estimates, Switzerland

JEL Classification: H72, I22, J18