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The Economic Benefits of Improving Efficiency in Public Spending on Education in the European Union

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  • Peter Voigt
  • Anna Thum-Thysen
  • Wouter Simons

Abstract

Education provides substantial long-term gains for individuals, the economy and society as a whole. Accordingly, investing in education and training is part of the solution to many of the challenges Europe is facing, including globalisation, shrinking of the workforce and the changing nature of regular work. Policy makers allocate an important share of taxpayers’ money to achieve high quality education. However, spending may be subject to inefficiencies, i.e. potentially even more of an envisaged educational outcome (such as quantity, quality or inclusiveness of education) could be achieved if the money were spent according to best practice as defined by the performance across EU member states (“best practice across the EU”). To provide a measure of these gains we conduct a simple ‘back-of-the-envelope’ exercise, which relates PISA science score improvements from increasing efficiency in public spending on education to improvements in annual GDP per capita. Efficiency scores relating spending to PISA scores and semi-elasticities relating PISA scores to GDP per capita are taken from the existing literature. Results indicate that if we managed to eliminate any inefficiencies in spending with a view at achieving high PISA scores, annual growth of GDP per capita in the EU would be 0.8 percentage points higher in the long run; with variations across member states between 0.4 (as in Estonia) and 1.6 percentage points (as in Cyprus).

Suggested Citation

  • Peter Voigt & Anna Thum-Thysen & Wouter Simons, 2020. "The Economic Benefits of Improving Efficiency in Public Spending on Education in the European Union," European Economy - Economic Briefs 056, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecobri:056
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    References listed on IDEAS

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    Cited by:

    1. Anna Thum-Thysen & Rossella Cravetto & Jan Varchola, 2021. "Investing in People’s Competences A Cornerstone for Growth and Wellbeing in the EU," European Economy - Discussion Papers 139, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

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    More about this item

    Keywords

    human capital; quality of public finance; investment on education; efficiency analysis; Voigt; Thum-Thysen; Simons.;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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