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PUBLIC INVESTMENT IN A HIERARCHICAL EDUCATIONAL SYSTEM WITH CAPITAL–SKILL COMPLEMENTARITY

Published online by Cambridge University Press:  18 October 2016

Assaf Sarid
Assaf Sarid*
Affiliation:
Tel Aviv University
*
Address correspondence to: Assaf Sarid, Department of Economics, University of Haifa, 199 Aba Khoushy Avenue, Mount Carmel, Haifa 3498838, Israel; e-mail: asarid@econ.haifa.ac.il.
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Abstract

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In this study I bring together two different literatures: the hierarchical education literature and the skill-biased growth 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.

Keywords

Education and DevelopmentGovernment Educational ExpendituresHuman CapitalLife-Cycle Models
Type
Articles
Information
Macroeconomic Dynamics , Volume 21 , Issue 3 , April 2017 , pp. 757 - 784
Copyright
Copyright © Cambridge University Press 2016 

Footnotes

I would like to thank two anonymous referees and an associate editor for their useful comments. I am thankful to Itzhak Zilcha, Joseph Zeira, Daniel Tsiddon, and participants of the seminar at the Department of Economics, University of Haifa for their helpful suggestions.

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