Public overspending in higher education

We study the trade‐off between governmental investments in pretertiary and tertiary education from an efficiency point of view. We develop a model comprising agents with different incomes and abilities, public and private schools, and public universities that select applicants based on an admission...

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Bibliographic Details
Published in:Bulletin of economic research 2023-07, Vol.75 (3), p.588-608
Main Authors: Brotherhood, Luiz, Delalibera, Bruno R., Torres de Mello Pereira, Luciene
Format: Article
Language:English
Subjects:
Applicants
College students
educational stages
Higher education
Human capital
Investments
investments in education
Overspending
Private schools
Productivity
public education
Public schools
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Summary:We study the trade‐off between governmental investments in pretertiary and tertiary education from an efficiency point of view. We develop a model comprising agents with different incomes and abilities, public and private schools, and public universities that select applicants based on an admission exam. Reallocating governmental resources from tertiary to pretertiary education may positively affect aggregate production and human capital if some conditions are satisfied. For instance, in an economy with a high proportion of credit‐constrained students, a reallocation of expenditure toward public schools benefits many students, compensating for the negative effect of a decrease in public university investments. We also quantitatively investigate the optimal allocation of public investment between pretertiary and tertiary education, and we find that a 10% increase in productivity of public investments in pretertiary education could increase the optimal GDP between 2.1% and 3%.
ISSN:0307-3378
1467-8586
DOI:10.1111/boer.12372