Abstract
PurposeThis paper aims to examine the growth effects of human capital investment achieved through publicly‐provided, compulsory education, financed from income and consumption taxes.Design/methodology/approachConstructs an endogenous growth model for developing countries, based on human capital accumulation in which education is publicly provided and financed, and schooling is compulsory.FindingsPublic investment in human and physical capital are financed from taxes on wage and capital income, and consumption. Semi‐reduced forms are obtained to examine the equilibrium growth properties of the model, allowing the steady‐state effects of fiscal policy to be derived. The specification of the human capital production function and the strength of labour supply effects are shown to be important for the magnitude of steady‐state outcomes. Simulations illustrate the model's steady‐state and transitional dynamic properties.Originality/valueProvides an analysis of the growth impact of state‐provided education.
Highlights
A central tenet of education policy in developing countries is that expansion of school enrolments is desirable, for reasons of social justice, and because economic prosperity is perceived to be fostered by the accumulation of human capital via education.1 This paper examines the growth effects of human capital investment achieved through publicly-provided, compulsory education, financed from income and consumption taxes
This paper has examined the role of publicly provided and tax-financed human capital accumulation in the context of a general equilibrium endogenous growth model
A key difference from previous models of endogenous human capital accumulation in the Lucas (1988, 1990) tradition is that schooling is compulsory and exogenous to the representative individual
Summary
A central tenet of education policy in developing countries is that expansion of school enrolments is desirable, for reasons of social justice, and because economic prosperity is perceived to be fostered by the accumulation of human capital via education. This paper examines the growth effects of human capital investment achieved through publicly-provided, compulsory education, financed from income and consumption taxes. A central tenet of education policy in developing countries is that expansion of school enrolments is desirable, for reasons of social justice, and because economic prosperity is perceived to be fostered by the accumulation of human capital via education.. This paper examines the growth effects of human capital investment achieved through publicly-provided, compulsory education, financed from income and consumption taxes. Since Lucas (1988, 1990) education has been extensively examined in the context of models in which individuals allocate their time to education within an inter-temporal utility-maximising framework.. The theoretical literature on human capital and growth is generally separate from that on fiscal policy and growth. Any analysis of the growth impact of state-provided education cannot be conducted independently of the financing implications, as dictated by the government budget constraint..
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