Education and Economic Growth in Slovenia: A Dynamic General Equilibrium Approach with Endogenous Growth

Verbic, Miroslav and Majcen, Boris and Cok, Mitja (2009): Education and Economic Growth in Slovenia: A Dynamic General Equilibrium Approach with Endogenous Growth.

Abstract

In the article we model education and human capital as major endogenous growth elements in a small open economy general equilibrium framework and consider several policy scenarios for Slovenia. Decrease of the PIT rate and increase of government spending on education turned out to be the most effective policy measures. It is important, though, to understand its transitory dynamic. Namely, as education expenditure is increased, certain amount of labour is temporarily withdrawn from its productive use and put into the educational system. Higher skill upgrade of labour requires longer and higher short-term labour force decrease, but also provides us with higher long-term growth. The households that would gain more utility from such policy scenarios are those with more skilled labour and thus higher income level.

• Item Type: MPRA Paper
• Language: English
• Keywords: education; endogenous growth; general equilibrium modelling; Slovenia
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models; H - Public Economics > H5 - National Government Expenditures and Related Policies > H52 - Government Expenditures and Education

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