Education economics or the economics of education is the study of economic issues relating to education, including the demand for education and the financing and provision of education.

Contents 1 Demand for education 2 Financing and provision 3 Education production function 4 See also 5 Notes 6 Referencecs 7 External links

[edit] Demand for education

The dominant model of the demand for education is based on human capital theory. The central idea is that undertaking education is investment in the acquisition of skills and knowledge which will increase earnings, or provide longterm benefits such as an appreciation of literature (sometimes referred to as cultural capital).^[1] Studies from 1958 attempted to calculate the returns from additional schooling. Later results attempted to allow for different returns across persons or by level of education.^[2]

Statistics have shown that countries with high enrollment/graduation rates have grown faster than countries without. The United States has been the world leader in educational advances, beginning with the high school movement (1910-1950). When looking at correlations in the data, education seems to generate economic growth, however, it could be that we have this causality relationship backwards. We need to consider this possibility. 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.^[3]

An alternative model of the demand for education, commonly referred to as screening is based on the economic theory of signalling. The central idea is that the successful completion of education is a signal of ability.^[4]

[edit] Financing and provision

In most countries school education is predominantly financed and provided by governments. Public funding and provision also plays a major role in higher education. 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 argue that universal public provision promotes equality of opportunity and social cohesion. Opponents of public provision advocate alternatives such as vouchers.^[5][6][7]

[edit] Education production function

An education production functions is an application of the economic concept of a production function to the field of education. 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 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.^[8] 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.^[9][10] 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.^[11][12][13] Additionally, policy discussions about class size reduction heightened academic study of the relationship of class size and achievement.^[14][15]

[edit] See also

• Economics education
• Academic Inflation
• Education policy
• Educational devaluation

[edit] Notes

[edit] Referencecs

• Roland Bénabou (1996), "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review,86(3) pp. 584-609.
• Mark Blaug (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 (1992) "The Trade-off between Child Quantity and Quality," Journal of Political Economy, 100(1), pp. 84-117.
• Eric Hanushek 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), pp. 1209-1238.
• Geraint Johnes 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, and John F. Kain (2005). "Teachers, Schools, and Academic Achievement," Econometrica, 73(2), pp. 417-458. Abstract.
• Sherwin Rosen (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 (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 and David E. Bloom. Abstract.

[edit] External links

• Economics of Education Review Description & links to article titles.
• Education Economics Aims & Scope & links to article titles.
• World Bank, "Economics of Education"

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