Public investment in basic education and economic growth

Abstract

Purpose – The main purpose of this paper is to visualize the relation between government spending on basic education and the human capital accumulation process, observing the impacts of this spending on individual investments in higher education, and on economic growth.Design/methodology/approach – The paper uses an overlapping‐generations model where the government tax the adult generation and spent it in basic education of the next generations.Findings – It was demonstrated that the magnitude of the marginal effect of government spending in basic education on growth crucially depends on public budget constrains.Originality/value – The paper explains why some countries with a lot of public investment in basic education growth at low rates. In that sense if a country has only a lot of public investment in basic education without investment in higher education it may growth at low rates because the taxation can cause distortions in the agents incentives to invest in higher education.