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(Mis-)Understanding Education Externalities

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  • Mueller, Normann

Abstract

This article critically evaluates the current state of research on education externalities. It occurs that much of the confusion regarding their magnitude results from conceptual misunderstandings pertaining to their nature. The essay distinguishes the concepts education, teaching, and knowledge. Whereas pure teaching yields externalities on the primary and secondary level, only the generation of knowledge may produce the spillovers which are typically linked to the tertiary level. The accumulation of education itself does not have such an effect. Education is argued to be a private good with well defined property rights. Individuals may exploit those and provide the production sector with the efficient amount of human capital. Following this rationale, it is demonstrated that empirical studies, contrasting estimations of private and social returns to education, are unsuitable to substantiate the existence of externalities. As a consequence, subsidies to tertiary programs are called into question.

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  • Mueller, Normann, 2007. "(Mis-)Understanding Education Externalities," MPRA Paper 5331, University Library of Munich, Germany, revised Mar 2007.
    • Handle: RePEc:pra:mprapa:5331
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    3. Marius-Cristian PANĂ, 2015. "Education and society: an institutional approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(603), S), pages 139-150, Summer.

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    More about this item

    Keywords

    Public education finance; Education expenditures; Human capital externalities; Property rights; Endogenous economic growth; Private return; Social return; Public goods;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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