INVESTMENT IN PRIMARY, SECONDARY, AND HIGHER EDUCATION AND THE EFFECTS ON ECONOMIC GROWTH

This author analyzes the effects of primary, secondary, and higher education on per capita growth for flow measures of education: enrollment rates, public expenditures, and expenditures per student. Worldwide panels since 1960 and developing and developed country subsamples are examined. Secondary and higher education enrollment rates and expenditures per student in lower education stages and primary overall demonstrate significance. Public higher education expenditures overall and per student are disadvantageous. This study recommends raising enrollment rates and prioritizing public expenditures toward lower education stages, while ensuring that expenditures per student keep up with increases in student cohorts. Indirect effects of education are explored. (JEL O11 , H52 , I28 )     

Do Macroeconomic Structures and Policies Shape the Employment Intensity of Growth Differently for Women and Men?

Since all macroeconomic policies are enacted within a certain set of distributive relations and institutional structures, the employment intensity of growth is likely to vary for men and women depending on the nature and context of output growth. I examine the gendered nature of this growth-employment nexus by analyzing the differential impacts that macroeconomic policies and structures have on growth’s employment intensity by gender for eighty countries in the period from 1990 to 2012. Such an understanding is of particular relevance to policymakers concerned with the linkages between growth and human development, as the question of whether the benefits of economic growth are broadly shared is one that centers on the capacity of economies to generate high-quality employment. Although education levels and non-agricultural sectors are associated with more employment intensive growth for men and women, policies supporting reductions in non-wage care work, prioritizing public expenditures on education, and promoting secondary school enrollment for girls are especially linked with growth that is more employment intensive for women. The results I obtain here illuminate broad trends through a very wide lens and should be applied in conjunction with more intimate knowledge of how cultural, technological, legal, political, and economic activities uniquely affect one another in particular countries.     

The effects of heavily indebted poor countries initiative (HIPC) on millennium development goals (MDGs) for education

In this study, we employ the difference in difference approach to estimate the impact of heavily indebted poor countries initiative on Millennium Development Goals for education in Africa. Using the World Bank data for the period 1990–2015, the studies further identifies other factors that contribute to the achievement of millennium development goals for education. For instance, because of HPIC, the level of the following education MDGs indicators increased: gross enrollment in primary school (21.69%), female-to-male ratio (8.68%) and primary completion rate (13.69). Our study also show that the probability to achieve the millennium development goals for education increases in: female primary education teachers; school enrollment in tertiary, private school enrollment; pupil–teacher ratio; control of corruption and political stability and decreases with increase in the rural population. In this perspective, government of African countries should promote governance, subsidy private schools and recruit female teachers.     

PRIVATE EDUCATION IN INDIA: A NOVEL TEST OF CREAM SKIMMING

Students in private schools routinely outperform those in public schools both in the United States and around the world. But do private schools make students better or do they simply cream skim better students? In this article I take advantage of the remarkable fact that in many districts in India a majority of students attend private schools. As the private share of school enrollment increases, cream skimming becomes less plausible as the explanation for a higher rate of achievement in private schools. Evidence for cream skimming is found when the private share of schooling is low, in the range of 0–15%, and thus private schools have a large public pool from which to skim. But the private effect on achievement does not appear to diminish greatly even in districts where more than 70% of students are in private schools. Most importantly, mean scores taken over the entire population of students, private and public, increase with the share of private schooling. These findings support a significant productivity effect of private schools. (JEL I25, I2, L33)     

WHY DO CHARTER SCHOOLS FAIL? AN ANALYSIS OF CHARTER SCHOOL SURVIVAL IN NEW JERSEY

Charter school competition can only work as a policy to improve public education if schools that do not contribute to this goal are allowed to fail. We estimate survival regressions to assess the effects of various factors on the probability of school failure. We find that students' test scores are the most important determinant of survival: a one standard deviation increase reduces the probability of failure by 76%. Higher expenditures per student and a longer wait list result in smaller, but significant, reductions. Enrollment, average performance in the host district, and student demographics do not significantly affect school survival. (JEL I21, H75)     

When do better schools raise housing prices? Evidence from Paris public and private schools

In this paper, we investigate how housing prices react to the quality of education offered by neighboring public and private schools. The organization of secondary schooling in the city of Paris, which combines residence-based assignment to public schools with a well-developed and almost entirely publicly funded private school system, offers a valuable empirical context for analyzing how private schools affect the capitalization of public school performance in housing prices. Using comprehensive data on both schools and real estate transactions over the period 1997–2004, we develop a matching framework to carefully compare sales across school attendance boundaries. We find that a standard deviation increase in public school performance raises housing prices by 1.4 to 2.4%. Moreover, we show that the capitalization of public school performance in the price of real estate shrinks as the availability of private schools increases in the neighborhood. Our results confirm the predictions of general equilibrium models of school choice that private schools, by providing an advantageous outside option to parents, tend to mitigate the impact of public school performance on housing prices.     

Public Investment and Economic Growth in Latin America: an Empirical Test

The paper analyzes the impact on economic growth of public investment spending and other relevant variables (such as human capital) for nine major Latin American nations over the 1983–93 period. The results suggest that both public and private investment spending contribute to economic growth. Overall central government consumption expenditures, on the other hand, are found to have a negative effect on private investment and growth. Finally, public expenditures on education and healthcare are found to have a positive and statistically significant effect on private capital formation and long–term economic growth. From a policy standpoint, the results suggest that indiscriminate cuts in public and private investment spending are likely to be counterproductive in the long run, and more importantly, scarce public expenditures should be channeled to the promotion of new human capital (via primary and secondary education) and the maintenance of existing human capital (through healthcare expenditures).     

Competition between private and public schools: testing stratification and pricing predictions

When there are peer effects in education, private schools have an incentive to vary tuition to attract relatively able students. Epple and Romano [American Economic Review 88(1) (1998) 33] develop a general equilibrium model characterizing equilibrium pricing and student selection into schools when peer effects are present. The model predicts that competition will lead private schools to give tuition discounts to more able students, and that this will give rise to an equilibrium exhibiting stratification by income and ability between the public and private sectors and to a hierarchy of schools within the private sector. The model also yields a variety of comparative-static predictions. The predictions of the model are tested in this paper using a unique data set assembled by Figlio and Stone [Research in Labor Economics (1999) 115]. Tests of equilibrium predictions of the model reveal that: The propensity to attend private school increases with both income and ability, and, among private schools, the propensity to attend the highest-tuition schools rises with both income and ability. Within private schools, tuition declines with student ability, with a substantial number of even high-income households paying little or no tuition. The correlation between income and ability is greater in public than private schools. Tests of comparative static predictions of the model reveal that: Both income and ability become stronger predictors of private school attendance as public school expenditure falls. Income becomes increasingly important in determining placement in the private school hierarchy as public school expenditure falls. Discounts to ability in the lowest-quality private school decline as public school expenditure rises while discounts to ability in the highest-quality private school are little affected by changes in public school expenditure. Expenditure in private schools rises as expenditure in public schools increases. These empirical results are consistent with the predictions of the theoretical model.     

Cohort crowding: How resources affect collegiate attainment

Analyses of college attainment typically focus on factors affecting enrollment demand, including the financial attractiveness of a college education and the availability of financial aid, while implicitly assuming that resources available per student on the supply-side of the market are elastically supplied. The higher education market in the United States is dominated by public and non-profit production, and colleges and universities receive considerable subsidies from state, federal, and private sources. Because consumers pay only a fraction of the cost of production, changes in demand are unlikely to be accommodated fully by colleges and universities without commensurate increases in non-tuition revenue. For this reason, public investment in higher education plays a crucial role in determining the degrees produced and the supply of college-educated workers to the labor market. Using data covering the last half of the twentieth century, we find strong evidence that large cohorts within states have relatively low undergraduate degree attainment, reflecting less than perfect elasticity of supply in the higher education market. That large cohorts receive lower public subsidies per student in higher education explains this result, indicating that resources have large effects on degree production. Our results suggest that reduced resources per student following from rising cohort size and lower state expenditures are likely to have significant negative effects on the supply of college-educated workers entering the labor market.     

To Segregate or to Integrate: Education Politics and Democracy

How is the quality of public education affected by the presence of private schools for the rich? Theory and evidence suggest that the link depends crucially on the political system. We develop a theory that integrates private education and fertility decisions with voting on public schooling expenditures. We find that the presence of a large private education sector benefits public schools in a broad-based democracy where politicians are responsive to low-income families but crowds out public education spending in a society that is politically dominated by the rich. The main predictions of the theory are consistent with state-level data and micro data from the U.S. as well as cross-country evidence from the Programme for International Student Assessment study.     

Endogenous Public Expenditures on Education

We construct a model of the determination of public funding of education through majority voting. Households have the option of privately supplementing public education. Alternatively, they can opt out of public education completely and choose private education. We find that in general the single‐crossing property cannot be used to establish existence of a majority voting equilibrium. Numerical solutions of the model reveal (i) when public education inputs and private supplements are substitutes, private school enrollment is often zero; and (ii) the funding level for public education is very sensitive to the productivity of private supplements and the elasticity of substitution between public inputs and private supplements.     

Aging,growth and the allocation of public expenditures on health and education

In this paper, I develop an overlapping generations endogenous growth model in which both public education and health are sources of growth by affecting the accumulation rate of the human capital stock and the savings rate over life expectancy. I first find that dynamic complementarities of public expenditures lead to minimum threshold levels of public education and health expenditures that ensure sustainable growth. I then show how governments can use the allocation of public expenditures as an alternative policy instrument to maximize growth without increasing the tax rate or the retirement age, as usually happens in aging economies.     

Public Education, Occupational Choice, and the Growth-Inequality Relationship

This article develops a dynamic general equilibrium model in which the occupational structure of the economy drives a wedge between the social and private returns to schooling for some workers. I study the impacts of alternative allocations of public resources between basic and higher levels of education on enrollments, income distribution, and growth. In particular, I illustrate how the growth-inequality relationship depends on the tension between two forces: (1) the "trickle-down" effects of expenditures on higher education and (2) the positive impacts on secondary enrollments generated by high-quality basic education and reduced parental inequality.     

A quantitative analysis of Turkish Private Education Reform

A recent education policy Turkish government is wishing to undertake is to shut down all private supplementary education centers (SECs) unless SECs manage to convert into a private school. With this policy, the government is willing to increase equality of opportunity among students. We show quantitatively that the policy, in fact, leads to a decrease in equality of opportunity since SECs are given the option to convert into private schools. We use a political economy model of education at which households, heterogeneous with respect to exogenously set income, choose among a continuum of private schools differentiated by tuition and a public school. Households choosing the public school can privately supplement their child's education spending in any amount. Public school is free of charge, and its spending is financed by income tax revenue collected from all households. Income tax rate is determined by majority voting. Achievement of a child depends only on educational spending. We calibrate the model's parameters by matching certain targets from 2013 Turkish data. We then exogenously restrict the supplemental education spending to zero in a counterfactual experiment. We find that variance of achievement (or inequality of opportunity) increases by 23.51% and mean achievement decreases by 1.74%.     

Public capital formation and labor productivity growth in Chile

Following the lead of the endogenous growth literature, this article analyzes the impact on labor productivity growth of public and private investment spending in Chile. Using cointegration analysis, the results of the dynamic labor productivity function for the 1960–95 period show that (lagged) public and private investment spending, as well as the rate of growth in exports, has a positive and highly significant effect on the rate of labor productivity growth. The estimates also indicate that increases in government consumption spending have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. The findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures to meet targeted reductions in the fiscal deficit as a proportion of GDP.     

Testing separability of public consumption in household decisions

In this paper we propose a sequential strategy, based on the microeconomic approach of the demand theory, in order to test for separability between private and public consumption. The aim of the present work is to verify, using a conditional almost ideal demand system, whether the different components of public consumption exert conditioning effects on the allocative structure of private spending. The empirical estimation of the model and the separability tests are developed for both a demand system in five functional categories of private spending, and for a demand system in six categories, where the private expenditures on those goods and services which can also be offered by the public sector are enclosed in a single functional category. The results of the separability tests, obtained using UK data for the 1974–2000 period, show that public individual consumption plays an important role in modifying consumer choices, while public collective consumption does not affect private consumption behaviours. The relationships between the different components of private spending and public individual consumption are both of substitutability and complementarity; in particular, we find that public individual consumption and the corresponding private expenditures on ‘Health, education, recreation and social protection’ are complements.     

The effects of generalized school choice on achievement and stratification: Evidence from Chile's voucher program

In 1981, Chile introduced nationwide school choice by providing vouchers to any student wishing to attend private school. As a result, more than 1000 private schools entered the market, and the private enrollment rate increased by 20 percentage points, with greater impacts in larger, more urban, and wealthier communities. We use this differential impact to measure the effects of unrestricted choice on educational outcomes. Using panel data for about 150 municipalities, we find no evidence that choice improved average educational outcomes as measured by test scores, repetition rates, and years of schooling. However, we find evidence that the voucher program led to increased sorting, as the “best” public school students left for the private sector.     

The political economy of public education

I study the relationship between income inequality and public spending in education in a voting model. Voters collectively choose the uniform quality level of public education, the amount of a public good, and the tax rate on labor income. Parents can decide to opt-out of the public education system by purchasing private education at the desired quality level, and children’s expected income is assumed to be increasing in the quality of education. I show that higher income inequality is associated with higher governmental spending in education if and only if the expected marginal returns to education are larger for the children of relatively low income parents. In turn, better public education tends to reduce future inequality. These results are consistent with most findings in the empirical literature about public investment in education. Lastly, I show that for other kind of publicly provided goods, such as health care, the relationship with income inequality exhibits an ambiguous or opposite sign.     

GOVERNMENT CONSUMPTION AND THE COMPOSITION OF PRIVATE EXPENDITURE: A CONDITIONAL ERROR CORRECTION MODEL

In this paper we provide empirical evidence of the relationship between government purchases and private expenditure by adopting a microeconomic approach. Using UK quarterly data, a long‐run demand system conditioned to the public sector is obtained by specifying a vector error correction model in which government consumption is assumed as an exogenous I(1) forcing variable. Our findings reject the hypothesis of separability of individual preferences between public and private expenditures, with simultaneous crowding‐out/in effects. Moreover, crowding‐out effects of government consumption on private spending are found to be larger for those goods and services that produce similar utility.     

Public financing of health expenditures,insurance, and health outcomes

The effects of public financing of health expenditures, insurance coverage and other factors on health outcomes are examined within health production models estimated using 1960–1992 data across 20 OECD countries. Mortality rates are found to depend on the mix of health care expenditures and the type of health insurance coverage. Increases in the publicly financed share of health expenditures are associated with increases in mortality rates. Increases in inpatient and ambulatory insurance coverage are associated with reduced mortality. The effects of GDP, health expenditures and age structure on mortality are similar to those in previous studies. Tobacco use, alcohol use, fat consumption, female labour force participation, and education levels are also significantly related to overall mortality rates. Increases in income inequality are associated with lower mortality rates, suggesting that the negative relationship between inequality and health outcomes suggested by some previous studies does not remain when a more complete model is estimated. The result that increases in public financing increase mortality rates is robust to a number of changes in specifications and samples. Thus, as countries increase the level of their health expenditures, they may want to avoid increasing the proportion of their expenditures that are publicly financed.