(Mis-)Understanding Education Externalities

Mueller, Normann (2007): (Mis-)Understanding Education Externalities.

Abstract

This article reviews the current state of research on education externalities. It finds that much of the confusion regarding their magnitude results from conceptual misunderstandings about their nature. The concepts of 'education', 'teaching', and 'knowledge' need to be distinguished for a better understanding. Whereas pure teaching yields externalities on the primary and secondary level, only the generation of knowledge may produce the spillovers which are typically linked to the tertiary level. The accumulation of education itself does not have such an effect. Education is argued to be a private good with well defined property rights. Individuals may exploit those and provide the production sector with the efficient amount of human capital. Following this rationale, it is demonstrated that empirical studies, contrasting estimates of private and social returns to education, are unsuitable to substantiate the existence of externalities. As a consequence, subsidies to tertiary programs are called into question.

• Item Type: MPRA Paper
• Language: English
• Keywords: Public education finance; Education expenditures; Human capital externalities; Property rights; Endogenous economic growth; Private and social return to education
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; D - Microeconomics > D6 - Welfare Economics > D62 - Externalities; H - Public Economics > H5 - National Government Expenditures and Related Policies; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I28 - Government Policy; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I22 - Educational Finance ; Financial Aid

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