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Effects of education externalities on schooling

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  • Fukumura, Koichi

Abstract

In some developed countries, such as Japan and Sweden, the number of years of education does not predict wage differences as opposed to in some countries such as the United States and Germany. To explain such seemingly contradictory observations, this study develops a simple model utilizing the ‘keeping up with Joneses’ effect regarding schooling decisions. The main result of this study is that the model can have multiple equilibria, which can explain the difference between the two groups of countries. Moreover, efficiency analysis reveals that changes in the strength of education reference and psychological cost parameters can alter the welfare ranking of multiple equilibria.

Suggested Citation

  • Fukumura, Koichi, 2017. "Effects of education externalities on schooling," Economic Modelling, Elsevier, vol. 60(C), pages 39-50.
    • Handle: RePEc:eee:ecmode:v:60:y:2017:i:c:p:39-50
    DOI: 10.1016/j.econmod.2016.08.021
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    References listed on IDEAS

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    3. Lu, Chia-Hui, 2018. "Social status, compulsory education, and growth," Economic Modelling, Elsevier, vol. 68(C), pages 425-434.

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    More about this item

    Keywords

    Education; Externality; Social preference; Multiple equilibria;
    All these keywords.

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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