Public Education Expenditure, Growth and Welfare

Konstantinos Angelopoulos (), Jim Malley and Apostolis Philippopoulos ()

Working Papers from Business School - Economics, University of Glasgow

Abstract: In this paper we study the quantitative macroeconomic effects of public education spending in USA for the post-war period. Using comparable measures of human and physical capital, from Jorgenson and Fraumeni (1989, 1992a,b), we calibrate a standard dynamic general equilibrium model where human capital is the engine of long-run endogenous growth and government education spending is justified by externalities in human capital. Our base calibration, based on moderate sized human capital externalities, suggests that public spending on education is both growth and welfare promoting. However, given that pubic education spending crowds-out private consumption, the welfare maximising size of the government is less than the growth maximising one. Our results further suggest that welfare gains, as high as four percent of consumption, are obtainable if the composition of public spending can be altered in favour of education spending relative to the other components of total government spending.

Date: 2007-06
New Economics Papers: this item is included in nep-dge, nep-edu, nep-hap, nep-hrm and nep-pbe
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Working Paper: Public Education Expenditure, Growth and Welfare (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2007_09

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