Public Education Expenditure, Growth and Welfare

42 Pages Posted: 2 Jul 2007

See all articles by Konstantinos Angelopoulos

Konstantinos Angelopoulos

Athens University of Economics and Business - Department of International and European Economic Studies

Jim Malley

University of Glasgow - Department of Economics

Apostolis Philippopoulos

Athens University of Economics and Business - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); University of Essex

Date Written: June 2007

Abstract

In this paper we study the quantitative macroeconomic effects of public education spending in USA for the post-war period. Using comparable measures of human and physical capital, from Jorgenson and Fraumeni (1989, 1992a,b), we calibrate a standard dynamic general equilibrium model where human capital is the engine of long-run endogenous growth and government education spending is justified by externalities in human capital. Our base calibration, based on moderate sized human capital externalities, suggests that public spending on education is both growth and welfare promoting. However, given that public education spending crowds-out private consumption, the welfare maximising size of the government is less than the growth maximising one. Our results further suggest that welfare gains, as high as four percent of consumption, are obtainable if the composition of public spending can be altered in favour of education spending relative to the other components of total government spending.

JEL Classification: H52, I28, O40

Suggested Citation

Angelopoulos, Konstantinos and Malley, Jim and Philippopoulos, Apostolis, Public Education Expenditure, Growth and Welfare (June 2007). CESifo Working Paper No. 2037, Available at SSRN: https://ssrn.com/abstract=997802 or http://dx.doi.org/10.2139/ssrn.997802

Konstantinos Angelopoulos

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

GR-10434 Athens
Greece

Jim Malley

University of Glasgow - Department of Economics ( email )

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom
+44 141 330 4617 (Phone)
+44 141 330 4940 (Fax)

HOME PAGE: http://www.gla.ac.uk/economics/malley/

Apostolis Philippopoulos (Contact Author)

Athens University of Economics and Business - Department of Economics ( email )

76 Patission Street
GR-10434 Athens
Greece
+301 322 3187 (Phone)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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