Economic Examination of the Case for Societal Subsidization of Education

Date of Award

2010

Document Type

Thesis

Degree Name

Bachelors

Department

Social Sciences

First Advisor

Elliott, Catherine

Keywords

Economies of Education, Public Spending on Education

Area of Concentration

Economics

Abstract

Within the field of the economics of education, economists are divided between those who argue that schooling increases human capital and those who argue that schooling is only a way for employees to signal employers that they are able, and thus, should be hired. In this context, the question that arises is: Should society fund education? If schooling is only a means of signaling, then society should leave it to employers to determine which workers perform better, rather than paying for their evaluation methods. In contrast, if schooling increases human capital, I argue that society has a role in making certain that all citizens have equal access to education in order to obtain this private benefit. However, I also argue that the quality of �being educated� has a positive spillover effect on society � in creating a type of �social capital�- and thus, that it should be publicly funded in order to avoid market failure. I investigate the market failures for education through positive externalities, asymmetric information, imperfect credit markets, and unequal access to schooling. Furthermore, I propose a new measurement of education by highest level of achievement, rather than years of schooling. Thus, I utilized data from the March 2009 Supplement of the Current Population Survey in order to investigate diploma effects, as well as tax liability and public assistance for college educated individuals. I find evidence of diploma effects, but also of differences among diplomas. Moreover, I find that individuals with at least one college credit pay more taxes and require less social assistance. I discuss both the economic and the social benefits of education and conclude that society should fund education.

Rights

This bibliographic record is available under the Creative Commons CC0 public domain dedication. The New College of Florida, as creator of this bibliographic record, has waived all rights to it worldwide under copyright law, including all related and neighboring rights, to the extent allowed by law.

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