PUBLIC INVESTMENT IN A HIERARCHICAL EDUCATIONAL SYSTEM WITH CAPITAL–SKILL COMPLEMENTARITY. (18th October 2016)

• Record Type: Journal Article
• Authors: Sarid, Assaf
• Is Part Of: Macroeconomic dynamics. Volume 21:Number 3(2017)
• Page Start: 757
• Page End: 784
• Publication Date: 2016-10-18
• Subjects: Education and Development, -- Government Educational Expenditures, -- Human Capital, -- Life-Cycle Models; Macroeconomics -- Periodicals; 339.05
• DOI: 10.1017/S136510051500067X
• Languages: English
• ISSNs: 1365-1005

Abstract

Abstract : In this study I bring together two different literatures: the hierarchical education literature and the skill-biased growth literature. In an overlapping-generations model I introduce capital–skill complementarity into a hierarchical education system. I obtain results that differ qualitatively from previous studies, among which are the following: (i) At earlier stages of development, basically educated labor contributes to growth more than highly educated labor. The opposite occurs at later stages. (ii) Even when all individuals acquire higher education, a growth-enhancing policy subsidizes higher education. (iii) In a growth-enhancing policy, the share of public resources allocated to basic education declines as the economy grows. (iv) The enrollment rate evolves in an S-shaped pattern, as occurred in several OECD countries.