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The effects of education externality on schooling

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  • Koichi Fukumura

    (Graduate School of Economics, Osaka University)

Abstract

This study theoretically investigates the effects of educational envy on schooling decisions. I develop a model where in workers enjoy utility from their levels of education and consumption. Moreover, worker fs utility also depends on other worker fs education levels, i.e., we assume the gkeeping up with Joneses h effect in education. The main result of this study is that such envy causes workers to make decisions on education level that differ from the decision made when envy is not considered. This result can explain the United States-Japan differences in the relationship between wages and schooling decisions. Analysis from a social planner fs perspective reveals that certain conditions on parameters can change the social preferences for the education level selected by individuals. Moreover, the model indicates that the economy may be overeducated in terms of the education for education fs sake situation.

Suggested Citation

  • Koichi Fukumura, 2015. "The effects of education externality on schooling," Discussion Papers in Economics and Business 15-05, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1505
    as

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    References listed on IDEAS

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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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