Government bias in education, schooling attainment and growth

Basu, Parantap and Bhattarai, Keshab (2011): Government bias in education, schooling attainment and growth.

Abstract

A surprising cross country stylized fact is that a higher public spending on education tends to lower the long run per capita growth rate and schooling returns. This is contrary to the conventional wisdom that education is a major driver of growth. In this paper, we revisit this issue and try to understand these puzzling facts in terms of an endogenous growth model. Our cross country calibration of the growth model predicts that countries with a greater government involvement in education experience lower schooling efforts and lower growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: endogenous growth, public spending on education
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N10 - General, International, or Comparative

References

Barro, R.J (1990), "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, 98, 5: Part II, S103-S12.

Basu, P, M. Gillman and J. Pearlman (2010), "Inflation, Human Capital and Tobin's q", mimeo.

Blankenau W. F., N. B. Simpson (2004) "Public education expenditures and growth ," Journal of Development Economics, 73: 2, April ,583-605

Blankenau, W & G. Camera (2009) "Public Spending on Education and the Incentives for Student Achievement," Economica, vol. 76 (303), pages 505-527, 07.

Blankenau B., N. Simpson and M.Tomljanovich (2007) "Public Expenditure on Education, Taxation and Growth: Linking Data to Theory," American Economic Review, Papers and Proceedings, 393-397.

Glomm, Gerhard and B. Ravikumar. (1998). "Flat rate taxes, government spending on education and growth." Review of Economic Dynamics, 1, 306-325.

Glomm, Gerhard and B. Ravikumar. (1997). "Productive Government Expenditures and Long-Run Growth."Journal of Economic Dynamics and Control, 21:1, pp. 183-204.

Glomm, Gerhard and B. Ravikumar. (1992). "Public versus private investment in human capital: endogenous growth and income inequality." Journal of Political Economy, 100, 818-834.

Gomme P and P. Rupert (2007), "Theory, Measurement and Calibration of Macroeconomic Models," Journal of Monetary Economics, 32: 51-77.

Hanushek, E. A. (2003). "The Failure of Input-based Schooling Policies", Economic Journal, 113, F64-F98.

Hanushek, E. A. and L. Woessmann (2008), "The Role of Cognitive Skills in Economic Development." Journal of Economic Literature, 46:3:607-668, September.

Lee J. W. and R. J. Barro (2001) "Schooling Quality in a Cross-Section of Countries", Economica, New Series, 68 : 272: Nov.: 465-488.

Lucas, R.E. (1978), "Asset Prices in an Exchange Economy," Econometrica, 46, 1429-1445.

Lucas R.E., Jr. (1988), "On the Mechanics of Economic Development", Journal of Monetary Economics, 22:1: 3-42. Mankiw N. G. (2003), Macroeconomics, Fifth Edition, Worth Publishers.

Mincer J., (1974), Schooling, Experience and Earnings, New York: Columbia University Press.

Prescott E.C. (1986) "Theory ahead of business cycle measurement" Carnegie Rochester Conference Series in Public Policy 25 (Autumn), 11-44.

Pritchett, L. (2001)."Where has all the education gone?" The World Bank Economic Review, Vol 15, No 3, pp. 367-391. Psacharopoulos G. And Patrinos H. A. (2004) "Returns to investment in education: a further update."Education Economics, 12:111-34.

Sylwester, K. (2000). "Income inequality, education expenditures and growth." Journal of Development Economics, Vol 63, Issue 2, pp. 379-398.

Temple, J. (2001). "Generalizations that aren't? Evidence on education and growth." European Economic Review 45, pp. 905-918.