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Educational supply policies: distortions and labor market performance

Maurício Benegas () and Márcio Veras Corrêa ()
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Maurício Benegas: Universidade Federal do Ceará
Márcio Veras Corrêa: Universidade Federal do Ceará

Journal of Economics, 2020, vol. 129, issue 3, No 1, 203-239

Abstract: Abstract Is it always worth implementing an open enrollment policy? And implementing policies that pursue equity in school supply? What is the impact of these two policies on the labor market? Do they produce efficient aggregate outcomes in both the labor and educational markets? This paper theoretically provides answers to these questions by studying the link between distortionary school supply policies and labor market performance. We build a two-sector labor market matching model, where the skilled segment of the economy is composed of workers who differ in the quality of the school they attended. We show the impact of government interventions to eliminate educational supply policy distortions within this theory. We demonstrate that both open enrollment and school equity policies have ambiguous effects on the labor market. Whenever their impact on the measure of workers choosing to become better educated is stronger than the additional school quality gains generated by the policy, the effects on the economy are negative. We also study the central planner solution, emphasizing the existing inefficiencies.

Keywords: Search frictions; Human capital; Public policy; Composition effect; Economic development (search for similar items in EconPapers)
JEL-codes: J24 J31 J38 O11 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:129:y:2020:i:3:d:10.1007_s00712-019-00686-4

DOI: 10.1007/s00712-019-00686-4

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