 Is Education Consumption or Investment? Implications for School CompetitionW. Bentley Macleod () and Miguel Urquiola Annual Review of Economics, 2019, vol. 11, issue 1, 563-589 Abstract: Milton Friedman argued that giving parents freedom to choose schools would improve education. His argument was simple and compelling because it extended results from markets for consumer goods to education. We review the evidence, which yields surprisingly mixed results on Friedman's prediction. A key reason is that households often seem to choose schools based on their absolute achievement rather than their value added. We show that this can be rational in a model based on three ingredients that economists have highlighted since Friedman worked on the issue. First, education is an investment into human capital. Second, labor markets can feature wage premia: Individuals of a given skill level may receive higher wages if they match to more productive firms. Third, distance influences school choice and the placements that schools produce. These factors imply that choice alone is too crude a mechanism to ensure the effective provision of schooling. Date: 2019 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:anr:reveco:v:11:y:2019:p:563-589 Ordering information: This journal article can be ordered from DOI: 10.1146/annurev-economics-080218-030402 Access Statistics for this article More articles in Annual Review of Economics from Annual Reviews Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA. |
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