L19: Education Flashcards
why should government be involved
positive externalities
- productivity spillover, reduced crime, citizenship
individual and family failures
- agency problem
- parents don’t make the best decisions for kids, or young people don’t make the right choices for themselves
market imperfection
- borrowing constraint that might limit participation
equity
fiscal externalities
with a progressive tax and transfer system, having individuals with higher earnings generates higher taxes and lower transfer payments
effects of having free public education
increases equality of education
increases education spending for the poor
overall spending on education could be lower
lack of competition among schools reduces incentives to provide efficient level and quality of education
policy responses to negative consequences of free public education
stimulate private alternatives through vouchers
adopt reforms in public sector and promote competition within public sector via charter schools
educational vouchers
fixed amount of money given by the government to families with school age children, who can spend it on any type of school, public or private
rationale for vouchers
consumer sovereignty
- allows individuals to more closely match their educational choices with their tastes
competition
- allows the education market to benefit from the competitive pressures that make private markets function efficiently
arguments against vouchers
may lead to segregation
may involve an inequitable expansion of public spending
- total public sector costs rise since the government pays part of the private school costs that affluent families pay
education market may not be competitive
charter schools
schools financed with public funds that are not under the direct supervision of local school boards or subject to all state regulations
accountability programs can have unintended effects
encourage teaching to the test, improving tests scores without learning
schools can manipulate the pool of test takers and the conditions under which they take tests
may encourage schools or teachers to cheat
effect of education on earnings
human capital accumulation
screening device
- education provides a means to separate high-ability from low-ability individuals and doesn’t improve skills
only improves productivity in the first case and not the second
role of government in higher education
state provision
- direct provision of higher education through local and state colleges/universities
pell grants
- subsidy to higher education from federal government
- grants to low-income families to pay for educational expenditures
loans
- direct from US department of education
- guaranteed from private banks where banks are guaranteed repayment by the government
tax relief
- tax credits/deductions
