Estimation of drivers of public education expenditure: Baumol’s effect revisited

Manabu Nose

International Tax and Public Finance, 2017, vol. 24, issue 3, No 7, 512-535

Abstract: Abstract This paper analyzes drivers of rising per-pupil public education spending, including Baumol’s “cost disease” effect. Empirical analyses using a large dataset of advanced and developing economies show that the contribution of Baumol’s effect was much smaller than implied by theory. Rather, the increase in per-pupil spending reflects rising wage premiums paid for teachers in excess of market wages, especially in developing countries. The strong wage premium effect suggests that institutional characteristics that govern teachers’ wage-setting are key determinants of education expenditure.

Keywords: Public education expenditure; Baumol’s effect; Wage premium (search for similar items in EconPapers)
JEL-codes: H52 I21 I25 I28 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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Working Paper: Estimation of Drivers of Public Education Expenditure: Baumol’s Effect Revisited (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:24:y:2017:i:3:d:10.1007_s10797-016-9410-7

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DOI: 10.1007/s10797-016-9410-7

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