Lobbying for Education in a Two-sector Model

Debora Di Gioacchino and Paola Profeta

No 138, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Roma

Abstract: Modern economies devote a relevant share of their resources to education. However, even among industrialised countries, there are differences in the traits of the education system and in its outcome in terms of human capital composition. The question we pose in this paper is why the composition of human capital is so diversified. The answer we propose is that the education system responds to the economy’s structure of production. Skills are required by firms according to their needs and are supplied through the education system. We analyse the political economy of education in a two-period model in which heterogeneous firms, specialised in two different sectors, try to induce the government to finance the type of education which is complementary to their production. In the first period, the policy-maker decides the skill composition of new-workers which will determine the supply of skills in the second period. Firms may lobby to obtain their preferred skill composition. We show that in the political equilibr um in which firms in both sectors get organised, the policy-maker chooses the same skill composition that would be chosen by the social planner. Moving to endogenous lobbying, we are able to show that, if there are no costs of lobbying, then both sectors will lobby in equilibrium. However, in the more realistic case in which if lobbying is costly it may be that only one sector will find it profitable to offer monetary contribution; which sector gets organised depends on sector's share in total output, relative productivity and prices of the two sectors.

Keywords: Endogenous lobbying; human capital composition; structure of production. (search for similar items in EconPapers)
JEL-codes: D72 I2 (search for similar items in EconPapers)
Pages: 33
Date: 2010-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Lobbying for Education in a Two-Sector Model (2014)
Working Paper: Lobbying for Education in a Two-sector Model (2011)
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