Public Education Expenditures Research Articles

Public Education Expenditures, Growth and Income Inequality

Public education expenditures are usually seen as having at least two desirable effects. On the one hand, it can foster economic growth through human capital accumulation. It can also decrease income inequality by offering every student the same learning opportunities. This paper studies both aspects of public education expenditures in a model of occupational choice with an endogenous supply of teachers. First, we show that the impact of public education expenditures on economic growth depends on the quality of teachers. The quality of the educational sector, in turn, depends on the level of public education expenditures as well as on the shape of the human capital distribution in the economy. In particular, we show that economies whose human capital distribution exhibits fatter tails can attract teachers of higher quality for the same level of public education spending. This implies that empirical studies aiming at identifying the role of public education expenditures should control for higher-order (beyond the mean) of the human capital distribution. Second, this paper documents a U-shaped relationship between public education spending and income inequality for a cross-section of countries as well as across US states. In our model of occupational choice, managers and workers are imperfect substitutes in production. Increasing public education expenditures (through increased taxation) modifies occupational choice, supply and demand of workers. Whereas an increase in public education spending benefits all through an improvement of production efficiency, relative income gains at the top and bottom of the distribution depends on the reallocation of labor across occupations and changes in human capital distribution. The general equilibrium interaction between these different forces can result in a U-shaped relationship between the level of public education spending and income inequality. We calibrate our model on data from 8 OECD countries and show that some countries, among which the U.S., could spend more on public education to yield more income growth and less income inequality.

Natural resources: A curse on education spending?

In line with the rising interest in harnessing natural resource revenues for economic and human development through productive government investments, this paper aims to address an important blind spot in our understanding of the “resource curse” by contributing innovative insights on how natural resource wealth impacts government priorities and expenditure practices. Using a large panel dataset of 140 countries covering the period from 1995 to 2009, we find an adverse effect of resource dependence on public education expenditures relative to GDP that is robust to controlling for a range of additional covariates. Furthermore, our findings indicate that this resource curse effect on the government prioritization of education mainly stems from point-source natural resources. These results are of particular importance for the sustainable management of natural resource wealth in developing countries, as they could achieve especially high returns by investing resource revenues in public goods such as education. While this paper underlines the importance of institutions and government accountability, our findings also raise questions on the role of the private sector as a partner in development, as the extractives industry could consider increasing funding for education through Corporate Social Responsibility (CSR) initiatives.

Smart Developmentt. An Essay on a New Political Economy of the Environment

In this book, we present a first empirical reflection on ‘smart development’, its measurement and its possible ‘drivers’ and ‘bottlenecks’. The very idea of ‘smart development’ was first proposed by Meadows (1992) and has not been really followed up to now in social science ever since. We first provide cross-national data, how much ecological footprint is used in the nations of the world system to ‘deliver’ a given amount of democracy, economic growth, gender equality, human development, research and development, and social cohesion. To this end, we first developed UNDP-type performance indicators from current standard international comparative, cross-national social science data on these six main dimensions of development and on the combined performance on the six dimensions (a UNDP type ‘human development index plus’). We then show the non-linear standard OLS regression trade-offs between ecological footprints per capita and their square on these six components of development and the overall super-UNDP development performance index, derived from them. The residuals from these regressions are our new measures of smart development: a country experiences smart development, if it achieves a maximum of democracy, economic growth, gender equality, human development, research and development, and social cohesion, and the combination of them with a minimum of ecological footprint. We then look at the cross-national drivers and bottlenecks of this ‘smart development’, using standard comparative cross-national data, which operationalize standard economic, sociological and political science knowledge in international development accounting. We compare the predictive power of these standard predictors, using standard OLS stepwise regression procedures, based on IBM SPSS XXII. Apart from important variables and indicators, derived from sociological dependency and world systems theories, we also test the predictive power of other predictors as well, ranging from geography and achieved development levels to the clash of civilization models, feminist theories, migration theories, and the ‘small is beautiful paradigm’ in the tradition of Schumacher. Our estimates underline the enormous importance of the transfer of resources from the centre to the periphery, brought about by migration, with huge statistical observed positive effects of received worker remittances on smart human development, Happy Life Years, smart gender justice, smart R&D, and both formulations of the smart development index.Finally, we take up an issue, which has been very prominent in recent global public health debate. Following the path-breaking articles by Wilkinson and associates, income inequality has a very detrimental effect on life quality. But life quality also depends in a non-linear fashion from environmental data. Thus, the Wilkinson research agenda finds its proper place also in debates about ‘smart development’, but certainly, the weight of other variables, such as • Membership in the Islamic Conference• military expenditures per GDP• Muslim population share per total population• public education expenditure per GNP• UNDP education index• worker remittance inflows as % of GDPalso has to be properly taken into account.

Public Expenditure, Demography and Growth: Theory and Evidence from India

Many countries in the developed world are ageing in terms of their distribution of population. Conversely, a number of countries in the south have younger population. India for example, has 60% of its population in the age group of 15-59, with the mean age close to 27 years as of present times. The lower share of population in the higher and lower age brackets make the dependency ratio lower than that of the ageing countries. The economic growth such a large share of working age population can usher in lies at the core of the demographic dividends. However, low human capital, poor health and inadequate physical infrastructure seems to create significant hurdles in the potential growth path such countries can achieve. We investigate through an endogenous growth model applied to the Indian macroeconomic data, as to whether public expenditures in education, health and physical infrastructure are conducive to rapid economic growth commensurate with the projected demographic dividends for India. We deploy a Structural Vector Autoregressive Model on data for shares of public expenditure on education and health as the main pillars of growth of human capital in the country, on the per capita GDP growth rate, the working age population, etc. Importantly, we find that a rise in expenditure on health imparts a positive impact on the working age population through greater participation. However, higher allocations for education and training draws workers away from the labor market in a country with large share of unskilled workers and employment opportunities in the large informal sector.

Public education expenditure and food inequality in rural India: an analysis in major states of India during 1983-2012

Economic inequality in the distribution of wealth or income continues to be a very serious problem for any community. Economic inequality can be captured by different families of inequality measures of which two are very popular and convenient - the Gini family and the SD-CV family. Inequality measures in any family may be of three types - relative, absolute and index measures of inequality. A serious question is that, what type of inequality do we want to reduce - relative or absolute? If we really want to reduce inequality, we should consider both relative and absolute measures of inequality. For India, inequality is measured for consumer expenditure of households with the help of data collected by National Sample Survey Organisation (NSSO) which divides household's total expenditure into two broad categories - food and non-food items. Income/expenditure inequality occurs due to many reasons/factors. Education expenditure is one of the important factors. Using panel data for 15 major states of rural India for the period 1983-2012, this paper empirically examines whether public expenditure on education succeeds to reduce food inequality or not.

Empirical Study of the Factors which Have an Impact on University Performance in EU Countries, Reflected by the Shanghai Ranking

Abstract The study tries to prove the existence of a significant relationship between EU countries academic excellence measured by international university rankings scores and the level of attainment for the EU strategic objectives in higher education and research, as are measured by the countries’ values of the afferent indicators. The study was applied to the correlation between some headline indicators of the Europe 2020 strategy and the Shanghai Ranking scores. Measuring the strength of a linear association between variables by using the Pearson Correlation, a strong correlation was found between the country Shanghai scores and the country values for indicators such as: “public expenditure in education”, “expenditure in R&D”, “patent stock”, and “lifelong learning”. A moderate correlation with students’ international mobility was also identified.

Does expansion of higher education lead to trickle-down growth?

The paper revisits the debate on trickle-down growth in view of the widely discussed changes in the distribution of earnings and income that followed a massive expansion of higher education. We propose a dynamic general equilibrium model to dynamically evaluate whether economic growth triggered by an increase in public education expenditure on behalf of those with high learning ability eventually trickles down to low-ability workers and serves them better than redistribution through labor income taxation or education policies targeted to the low-skilled. Our results suggest that promoting higher education implies that low-skilled workers first lose in terms of consumption and income but eventually gain. Policies that aim at expanding the skills of low-ability workers make them better off only moderately because of adverse general equilibrium effects. Low-ability workers typically benefit most from redistribution.

The Effect of Public Education Expenditure on Shadow Economy: A Cross-Country Analysis

This paper empirically examines whether devoting more resources to education can reduce the size of the shadow economy on a cross-section of countries. The findings show a negative relationship between public education expenditure and the size of the shadow economy, which is robust to the inclusion of different proxies for the control variables, a large set of policy variables, regional differences and endogeneity. The findings also emphasize the role of education, suggesting that public policies devoted to higher education level imply a decreasing effect on the shadow economy.

Mathematical Models and Effectiveness Analysis of Government Education and Health Expenditures on Economic Growth

This paper establishes a novel mathematical model to analyze the effects of government education and health expenditures on the economic growth. Based on the Cobb-Douglas production function, the analysis of education and health expenditures is conducted using the two-stage least square method and applying the Gaussian mixture model as the estimation method. The results provide not only the long-term relationship between education and economic growth, but also between health expenditure and economic growth. In addition, they show that both education and health expenditures have different contributions to economic growth, resulting in unbalanced development in various districts. We also compare the per capita public health and education expenditures and their economic effects in different regions. We conclude that the district with relatively less contribution may not necessarily increase their expenditure; hence, effective management may be more important. In accordance with the regional contribution divergence, the government should formulate corresponding policies to improve the allocation of education and health resources and ensure rational capital flow among regions.

The Tax Returns of Public Spending on Universities: An Estimate with Monte Carlo Simulations

Pastor J. M. and Peraita C. The tax returns of public spending on universities: an estimate with Monte Carlo simulations, Regional Studies. This paper proposes a methodology based on counterfactual scenarios and the existence of uncertainty to estimate the tax returns of public spending of regional governments on their public universities. The introduction of differences in the time spent by the students at university and the proportion of the total public expenditure implies making assumptions about uncertainty. The paper applies Monte Carlo simulations incorporating stochastic elements to estimate the tax returns of public spending in the University of the Basque Country (Spain). The results indicate that public expenditure in university education is a profitable investment from a fiscal perspective.

The Impact of Public Expenditures in Education, Health, and Infrastructure on Economic Growth and Income Distribution in Peru

The Peruvian economy has exhibited remarkable growth in the past 20 years. Good tax and monetary policies, along with comprehensive structural adjustment, which has attracted substantial foreign investment, are regarded as the pillars of this success. Notwithstanding the advances experienced on reducing poverty, lowering inequality and unemployment continue to be elusive targets for the Peruvian government and constitute main causes of social unrest. This paper assesses the impact of Peruvian public expenditures in education, health, and infrastructure on economic growth, poverty, and income distribution in the past 20 years using a Dynamic Computable General Equilibrium Model (DCGEM), which is an economy-wide model that describes the behavior of producers and consumers and the linkages among them.

Identifying the Flypaper Effect in the Presence of Spatial Dependence: Evidence from Education inChina's Counties

AbstractIn the context ofChina without a median voter system, this study examines whether the “flypaper effect,” an unconditional lump‐sum grant from the upper governments to the county governments increases spending in a greater proportion than an equivalent rise in local income, holds true inChina. UsingChina's county‐level education data during 2007, the models have been estimated using a spatial econometric technique that accounts for spatial interaction behavior on public education expenditure across local governments. We find that, in the presence of spatial interdependence, there is no evidence of a “flypaper effect” when different spatial weighting schemes and the endogeneity problem of education grants are accounted for. Rather, the “anti‐flypaper effect” is found. Important policy implications are drawn forChina's fiscal decentralization reform.

Accounting for cross-country differences in intergenerational earnings persistence: The impact of taxation and public education expenditure

I document a strong negative cross-country correlation between intergenerational earnings persistence and tax progressivity, and between intergenerational earnings persistence and public expenditur ...

Higher Education as a Means of Achieving Economic Growth and Development – A Comparative Analysis of Selected EU and former Soviet Union Countries

In the last twenty years, higher education policies have become increasingly important national priorities in both the developed and the developing countries. According to the endogenous growth theory, higher education and thereby accumulation of human capital is considered to be the main driver of economic competitiveness in the growing global economy founded on knowledge. Thus, as education is undoubtedly one of the main drivers of economic growth and development, an increase in the real expenditures for education is found in many countries. All this is especially evident in times of rapid technological changes. The interest of this paper is to show the relationship between GDP and public spending on education by applying the method of panel data analysis on the selected EU Member States and former Soviet Union Countries for the period 2000 – 2011. The results of the analysis showed that public expenditure for education, as well the size of the tertiary educated workforce and the number of researchers have a positive impact on GDP growth.

Public education expenditures and private school enrollment

AbstractIn this paper, I investigate whether increases in public education expenditures lead to reductions in private school enrollment. In order to deal with the endogeneity of public expenditures, I use as a natural experiment the 1998 FUNDEF reform in Brazil that caused exogenous variations in local public school funding. Using data from Brazilian School and Population censuses, I show that public education expenditures increases are associated with reductions in the share of private school enrollment for grade 1. However, the effect is smaller for grades 2 to 4, which is consistent with the existence of costs associated with switching schools.

Causes and Incentives for Terrorism in Pakistan

This study offers fresh empirical insights into the causes of terrorism in Pakistan. The authors present a novel strategy for hypothesis building in conflict studies, and explore the importance of the explanatory variables within the time frame of the analysis. The hypothesized relationships are tested using pooled cross-section time series data from five regions of Pakistan (the federally controlled area and four provinces from 1980 to 2010) using fixed effect negative binomial regression. The results indicate that public education expenditures, law & order expenditures, ethnic diversity, urban population, the presence of domestic military operations, and U.S. military aid to Pakistan all result in increased terrorist activity in Pakistan. This study recommends that ethnic diversity and multilingualism be respected in education in Pakistan, that the educational curriculum be cleansed of systemic incendiary language and bigotry, that law enforcement agencies be freed of political control, and that strategic partnership with the United States be reassessed considering the core long-term interests of Pakistan.

Education expenditure in China: potential strategic behavior among regional governments

In this study, we examine whether significant strategic interaction exists among Chinese provincial governments in determining the levels of their expenditures on education. The presence of such spatial interaction may be either due to spatial spillovers or due to spatial resource flows between provinces. We derive our basic regression specification based on the theoretical models in the literature. By applying a panel data generalized method of moments (GMM) method, we show that under a ‘smooth-distance-decay’ assumption in constructing the weighting scheme for the relevance of interaction between two provinces, our regression results provide evidence that supports the claim that there exists significant inter-provincial strategic interaction in public expenditure for education among the Chinese provinces.

In Public Education Expenditures We Trust: Does Trust Increase Support for Public Education Expenditures?

AbstractTrust is one crucial prerequisite for the welfare state. However, very few empirical studies exist that help us understand the mechanisms through which trust affects the welfare state. Influencing public support for developing friendly public policies might be one of these mechanisms. In this study, we use unique micro data from 34 countries to investigate the relationship between trust and support for public education expenditures. We use the Life in Transition Survey (LiTS) conducted by the European Bank for Reconstruction and Development (EBRD) and the World Bank in 2010. Our empirical results show that trust has a positive effect on support for public education expenditures. Our results are robust when controlled for various individual characteristics and country fixed effects, tested using OLS and Probit models and different samples. This empirical evidence helps us understand the micro foundations of support for public education expenditures.Keywords: Trust * Social capital * Tax * Public education expendituresJEL Classification: H31* O12 * Z13In his classic book, Putnam (1993) emphasizes the importance of social capital to institutions and economic development. Trust, defined as the propensity of a population to believe in the trustworthiness of other people whom they do not know personally, is one of the most important ingredients of social capital (see Guiso, Sapienza, & Zingales, 2006; Tabellini, 2008). Fukuyama (1995) argues that trust is one of the fundamental causes of large differences in economic prosperity levels between countries. Following the footsteps of Putnam (1993) and Fukuyama (1995), the empirical literature shows that trust is positively related to economic growth (Algan & Cahuc, 2010; Hovarht, 2013; Knack & Keefer, 1997; Knack & Zak, 2001), financial development (Guiso, Sapienza, & Zingales, 2004, 2008), the existence of a welfare state (Bergh & Bjornskov, 2011) a lighter regulatory burden (Aghion, Algan, Chauc, & Shleifer, 2010; Pinotti, 2012), and increased institutional development (Bjornskov, 2009; Knack, 2002; La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 1997; Tabellini, 2008;). Recent empirical results also suggest that trust has a positive effect on education (Bjornskov, 2009; Bjornskov & Meon, 2013; Dearmon & Grier, 2011; Papagapitos & Riley, 2009).As a contribution to this body of empirical literature, our study examines whether trust affects popular support for public education expenditures. Human capital has taken on a central role in the endogenous economic growth models, in where formal education often considered the primary source for human capital accumulation (Barro, 1991; Blankenau & Simpson, 2004; Ciccone & Papaionnou, 2007; Lucas, 1988; Nelson & Phelps, 1966). Since governments play a central role in human capital accumulation by funding the majority of primary and secondary education throughout the world, a potential link could exist between public education expenditures and economic growth. However, empirical evidence shows mixed results concerning the effect of public education expenditures on economic growth. Blankenau and Simpson (2004) offer one theoretical explanation for this ambiguity, namely that public education expenditures might crowd out other factors that enhance economic growth. When non-distortionary taxes (on labor and capital income) are used to finance expenditures, public education spending crowds out investment in both physical capital and private human capital investment. Therefore, growth would decrease with higher public education expenditures. In contrast, when consumption taxes are used to finance education, public education spending has no effect on private human capital investment. In this case, growth is increasing in line with public education expenditures. In a more recent theoretical work, Greiner (2008) shows that excessive spending on public education increases public debt, crowds out private investment, and reduces economic growth. …

Energy Subsidies and Public Social Spending: Theory and Evidence

This paper shows that high energy subsidies and low public social spending can emerge as an equilibrium outcome of a political game between the elite and the middle-class when the provision of public goods is subject to bottlenecks, reflecting weak domestic institutions. We test this and other predictions of our model using a large cross-section of emerging markets and low-income countries. The main empirical challenge is that subsidies and social spending could be jointly determined (e.g., at the time of the budget), leading to a simultaneity bias in OLS estimates. To address this concern, we adopt an identification strategy whereby subsidies in a given country are instrumented by the level of subsidies in neighboring countries. Our Instrumental Variable (IV) estimations suggest that public expenditures in education and health were on average lower by 0.6 percentage point of GDP in countries where energy subsidies were 1 percentage point of GDP higher. Moreover, we find that the crowding-out was stronger in the presence of weak domestic institutions, narrow fiscal space, and among the net oil importers.

Energy Subsidies and Public Social Spending: Theory and Evidence

This paper shows that high energy subsidies and low public social spending can emerge as an equilibrium outcome of a political game between the elite and the middle-class when the provision of public goods is subject to bottlenecks, reflecting weak domestic institutions. We test this and other predictions of our model using a large cross-section of emerging markets and low-income countries. The main empirical challenge is that subsidies and social spending could be jointly determined (e.g., at the time of the budget), leading to a simultaneity bias in OLS estimates. To address this concern, we adopt an identification strategy whereby subsidies in a given country are instrumented by the level of subsidies in neighboring countries. Our Instrumental Variable (IV) estimations suggest that public expenditures in education and health were on average lower by 0.6 percentage point of GDP in countries where energy subsidies were 1 percentage point of GDP higher. Moreover, we find that the crowding-out was stronger in the presence of weak domestic institutions, narrow fiscal space, and among the net oil importers.