Human capital, social capital, and public schooling

Abstract

Public education contributes to growth not only by building human capital but also by instilling common norms that increase social cohesion. This is modeled in the context of a political economy framework in which social cohesion reduces wasteful rent seeking, and thus strengthens incentives for investment in human captial. The political decisions that determine whether different social groups retain separate schooling systems, or adopt an integrated system, weigh these material advantages against the psychic cost to parents of alienating their children from traditional values. This aspect of public education helps explain why, commonly, education is publicly administered as well as publicly financed.