PUBLIC INVESTMENT in A HIERARCHICAL EDUCATIONAL SYSTEM with CAPITAL-SKILL COMPLEMENTARITY

By: Sarid A.
Published in: Macroeconomic Dynamics
SDGs : SDG 04  |  Units: Social Sciences  | Time: 2017 |  Link
Description: In this study I bring together two different literatures: the hierarchical education literature and the skill-biased gro wth 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. © 2016 Cambridge University Press.