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Education spending, economic development, and the size of government

Author

Listed:
  • Mark Millin

    (Department of Economics, University of Auckland, New Zealand)

  • David Fielding

    (Global Development Institute, University of Manchester, UK; Department of Economics, University of Otago, Dunedin, New Zealand)

  • P. Dorian Owen

    (University of Otago, Dunedin, New Zealand)

Abstract

We examine the association between economic development and two measures of public spending on education: the “national effort” (public spending on education as a proportion of GDP) and “budget share” (public spending on education as a proportion of total government spending). Using panel data for a large sample of countries from 1989 to 2015, we compare mean levels of national effort and budget share measures for economically and politically distinct groups of countries. We find that economically more developed (richer) countries are characterised by a higher national effort and a lower budget share than less economically developed countries. This implies that richer countries, on average, have larger public sectors than poorer countries, consistent with Wagner’s law and Baumol’s “cost disease” hypothesis.

Suggested Citation

  • Mark Millin & David Fielding & P. Dorian Owen, 2023. "Education spending, economic development, and the size of government," Public Sector Economics, Institute of Public Finance, vol. 47(3), pages 285-333.
    • Handle: RePEc:ipf:psejou:v:47:y:2023:i:3:p:285-333
    DOI: 10.3326/pse.47.3.1
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    References listed on IDEAS

    as
    1. Matthew A. Baum & David A. Lake, 2003. "The Political Economy of Growth: Democracy and Human Capital," American Journal of Political Science, John Wiley & Sons, vol. 47(2), pages 333-347, April.
    2. Adserà, Alícia & Boix, Carles, 2002. "Trade, Democracy, and the Size of the Public Sector: The Political Underpinnings of Openness," International Organization, Cambridge University Press, vol. 56(2), pages 229-262, April.
    3. Angel Angelov, 2019. "Public Expenditure On Education In The Eu Member States: A Cluster Analysis," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 1 Year 20, pages 52-64.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    education spending; Wagner’s law; Baumol’s cost disease; economic development; democracy;
    All these keywords.

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development

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