Education economics

Education economics

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Encyclopedia
Education economics or the economics of education is the study of economic issues relating to education
Education
Education in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...

, including the demand for education and the financing and provision of education. From early works on the relationship between schooling and labor market outcomes for individuals, the field of the economics of education has grown rapidly to cover virtually all areas with linkages to education. It has become a very vibrant area for research by young researchers, and it has led to four separate Handbook volumes covering both theoretical and empirical issues.

Demand for education


The dominant model of the demand for education is based on human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

 theory. The central idea is that undertaking education is investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...

 in the acquisition of skills and knowledge which will increase earnings
Earnings
Earnings are the net benefits of a Corporation's operation. Earnings is also the amount on which corporate tax is due. For an analysis of specific aspects of corporate operations several more specific terms are used as EBIT -- earnings before interest and taxes, EBITDA - earnings before...

, or provide long-term benefits such as an appreciation of literature (sometimes referred to as cultural capital
Cultural capital
The term cultural capital refers to non-financial social assets; they may be educational or intellectual, which might promote social mobility beyond economic means....

). An increase in human capital can follow technological progress as knowledgeable employees are in demand due to the need for their skills, whether it be in understanding the production process or in operating machines. Studies from 1958 attempted to calculate the returns from additional schooling (the percent increase in income acquired through an additional year of schooling). Later results attempted to allow for different returns across persons or by level of education.

Statistics have shown that countries with high enrollment/graduation rates have grown faster than countries without. The United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 has been the world leader in educational advances, beginning with the high school movement
High school movement
The high school movement is a term used in educational history literature to describe the era from 1910 to 1940 during which secondary schools sprouted across the United States...

 (1910–1950). There also seems to be a correlation between gender differences in education with the level of growth; more development is observed in countries which have an equal distribution of the percentage of women versus men who graduated from high school. When looking at correlations in the data, education seems to generate economic growth; however, it could be that we have this causality relationship backwards. For example, if education is seen as a luxury good, it may be that richer households are seeking out educational attainment as a symbol of status, rather than the relationship of education leading to wealth.

Educational advance is not the only variable for economic growth, though, as it only explains about 14% of the average annual increase in labor productivity over the period 1915-2005. From lack of a more significant correlation between formal educational achievement and productivity growth, some economists see reason to believe that in today’s world many skills and capabilities come by way of learning outside of tradition education, or outside of schooling altogether.

An alternative model of the demand for education, commonly referred to as screening
Screening (economics)
Screening in economics refers to a strategy of combating adverse selection, one of the potential decision-making complications in cases of asymmetric information...

, is based on the economic theory of signalling. The central idea is that the successful completion of education is a signal of ability.

Financing and provision


In most countries school
School
A school is an institution designed for the teaching of students under the direction of teachers. Most countries have systems of formal education, which is commonly compulsory. In these systems, students progress through a series of schools...

 education is predominantly financed and provided by governments. Public funding and provision also plays a major role in higher education
Higher education
Higher, post-secondary, tertiary, or third level education refers to the stage of learning that occurs at universities, academies, colleges, seminaries, and institutes of technology...

. Although there is wide agreement on the principle that education, at least at school level, should be financed mainly by governments, there is considerable debate over the desirable extent of public provision of education. Supporters of public education
Public education
State schools, also known in the United States and Canada as public schools,In much of the Commonwealth, including Australia, New Zealand, South Africa, and the United Kingdom, the terms 'public education', 'public school' and 'independent school' are used for private schools, that is, schools...

 argue that universal public provision promotes equality of opportunity and social cohesion. Opponents of public provision advocate alternatives such as vouchers.

Education production function


An education production function is an application of the economic concept of a production function
Production function
In microeconomics and macroeconomics, a production function is a function that specifies the output of a firm, an industry, or an entire economy for all combinations of inputs...

 to the field of education
Education
Education in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...

. It relates various inputs affecting a student’s learning (schools, families, peers, neighborhoods, etc.) to measured outputs including subsequent labor market success, college attendance, graduation rates, and, most frequently, standardized test
Standardized test
A standardized test is a test that is administered and scored in a consistent, or "standard", manner. Standardized tests are designed in such a way that the questions, conditions for administering, scoring procedures, and interpretations are consistent and are administered and scored in a...

 scores. The original study that prompted interest in the idea of education production functions was by a sociologist, James S. Coleman. The Coleman Report, published in 1966, concluded that the marginal effect of various school inputs on student achievement was small compared to the impact of families and friends.

The report launched a large number of successive studies, increasingly involving economists, that provided inconsistent results about the impact of school resources on student performance. The interpretation of the various studies has been very controversial, in part because the findings have been directly entered into policy debates. Two separate lines of study have been particularly widely debated. The overall question of whether added funds to schools are likely to produce higher achievement (the “money doesn’t matter” debate) has entered into legislative debates and court consideration of school finance systems. Additionally, policy discussions about class size reduction heightened academic study of the relationship of class size and achievement.

Marxist critique of education under capitalism


Although Marx and Engels did not write widely about education the social functions of education, their concepts and methods are theorized and criticized by the infuence of Marx as education being used in reproduction of capitalist societies. Marx and Engels approached scholarship as "revolutionary scholarship" where education should serve as a propaganda for the struggle of the working class. The classical Marxian paradigm sees education as serving the interest of capital and is seeking alternative modes of education that would prepare students and citizens for more progressive socialist mode of social organizations. Marx and Engels understood education and free time as essential to developing free individuals and creating many-sided human beings, thus for them education should become a more essential part of the life of people unlike capitalist society which is organized mainly around work and the production of commodities.

Referencecs

  • Roland Bénabou, 1996."Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review,86(3) p p. 584- 609.
  • Mark Blaug
    Mark Blaug
    Mark Blaug , was a British economist , who has covered a broad range of topics over his long career. In 1955 he received his PhD from Columbia University in New York under the supervision of George Stigler...

    , 1985. "Where Are We Now in the Economics of Education?" Economics of Education Review, 4(1), pp. 17–28. Abstract.
  • Clive R. Belfield, ed., 2006.Modern Classics In The Economics Of Education, Elgar. Description.
  • Eric A. Hanushek
    Eric Hanushek
    Eric Alan Hanushek is a Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University. He is also an expert on educational policy. His main area of interest is the economics of education, focusing on controversial areas of education policy including the class size reduction,...

    , 1986. "The economics of schooling: Production and efficiency in public schools." Journal of Economic Literature 24, no. 3 (September): 1141-1177.
  • Eric A. Hanushek
    Eric Hanushek
    Eric Alan Hanushek is a Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University. He is also an expert on educational policy. His main area of interest is the economics of education, focusing on controversial areas of education policy including the class size reduction,...

    , 1992. "The Trade-off between Child Quantity and Quality," Journal of Political Economy, 100(1), p p. 84-117.
  • Eric A. Hanushek
    Eric Hanushek
    Eric Alan Hanushek is a Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University. He is also an expert on educational policy. His main area of interest is the economics of education, focusing on controversial areas of education policy including the class size reduction,...

     and Finis Welch, ed., 2006. Handbook of the Economics of Education. Chapter titles, v. 1, and v. 2, pp. ix-ixx (detailed Contents).
  • Stephen A. Hoenack, 1996. "The Economics of Education in Developing Countries: An Assessment of the State of the Art," Economics of Education Review, 15(4), pp. 327–338. Abstract.
  • Caroline M. Hoxby, 1999. "The Productivity of Schools and Other Local Public Goods Producers," Journal of Public Economics, 74(1), pp. 1–30 Abstract.
  • _____, 2000. "Does Competition among Public Schools Benefit Students and Taxpayers?" American Economic Review, 90(5), p p. 1209- 1238.
  • Geraint Johnes
    Geraint Johnes
    Geraint Johnes is Professor of Economics at Lancaster University Management School.He was previously Lecturer, Senior Lecturer and Reader in Economics at Lancaster, and has spent periods as a visitor to institutions in the USA and Australia...

     and Jill Johnes, ed., 2004. International Handbook on the Economics of Education, Elgar. Chapter titles.
  • George Psacharopoulos and Harry A. Patrinos, 2004. "Returns to Investment in Education: A Further Update," Education Economics, 12(2), pp. 111–134. Abstract.
  • Steven G. Rivkin, Eric A. Hanushek
    Eric Hanushek
    Eric Alan Hanushek is a Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University. He is also an expert on educational policy. His main area of interest is the economics of education, focusing on controversial areas of education policy including the class size reduction,...

    , and John F. Kain, 2005. "Teachers, Schools, and Academic Achievement," Econometrica, 73(2), pp. 417–458. Abstract.
  • Sherwin Rosen
    Sherwin Rosen
    Sherwin Rosen was an American labor economist. He had ties with many American universities and academic institutions including the University of Chicago, the University of Rochester, Stanford University and its Hoover Institution. At the time of his death, Rosen was Edwin A. and Betty L...

    , 1987. "human capital," The New Palgrave: A Dictionary of Economics, v. 2, pp. 681–90.

Selected entries on education from The New Palgrave Dictionary of Economics
The New Palgrave Dictionary of Economics
The New Palgrave Dictionary of Economics , 2nd Edition, is an eight-volume reference work, edited by Steven N. Durlauf and Lawrence E. Blume. It contains 5.8 million words and spans 7,680 pages with 1,872 articles. Included are 1057 new articles and, from earlier, 80 essays that are designated as...

, 2008), 2nd Edition:
  • "education in developing countries" by Paul Glewwe. Abstract.
  • "human capital, fertility and growth" by Oded Galor. Abstract.
  • "intergenerational transmission" by Lance Lochner.Abstract.
  • "local public finance" by John M. Quigley. Abstract.
  • "population health, economic implications of" by David Canning
    David Canning
    David Canning is a British economist. Currently, he is Richard Saltonstall Professor of Population Sciences and Professor of Economics and International Health at the Harvard School of Public Health. He holds a Ph.D. in economics from Cambridge University and is currently deputy director of the...

     and David E. Bloom
    David E. Bloom
    David E. Bloom is an economist and demographer. He is currently the Clarence James Gamble Professor of Economics and Demography at Harvard University and director of its Program on the Global Demography of Aging. He is a Fellow of the American Academy of Arts and Sciences...

    . Abstract.

External links

  • Economics of Education Review Description & links to article titles.
  • Education Economics Aims & Scope & links to article titles.
  • World Bank
    World Bank
    The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...

    , "Economics of Education"