Education Policies and Economic Growth

Nikos Benos ()

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: This paper studies the general equilibrium implications of two types of education policy in an overlapping generations growth model with second-best policy. We examine vouchers, which augment inherited private education spending, and public investment on economy-wide human capital, that provides economy-wide externalities to individual human capital accumulation. The government determines jointly the allocation of tax revenues among the two types of education policy and tax policy, subject to the competitive decentralized equilibrium. Using plausible parameter values it is shown that it is socially optimal to spend heavily on economy-wide human capital accumulation and finance government spending by a modest proportional tax on initial human capital and a low tax on inherited private education expenditures.

Keywords: Public goods; human capital; growth; economic policy. (search for similar items in EconPapers)
Pages: 32 pages
Date: 2004-07
New Economics Papers: this item is included in nep-dev
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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:4-2004

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