Economics 147: The Economics of Education

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Economics 147 The Economics of Education

• Professor Nora Gordon
• Winter 2005
• Lecture 1

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Course overview

• What is the economics of education?
• Education as an investment (D)
• human capital and signalling
• Education production functions (S)
• Does money matter?
• Which inputs matter?
• Which technologies are most efficient?
• Markets for education
• Local vs. state finance
• Traditional and new forms of school choice
• Markets for teachers

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http//weber.ucsd.edu/negordon/econ147/econ147.ht
ml

• Prereqs Econ 1A and Econ 120A
• 3 problem sets, each 5 of course grade
• Due 1/20, 2/17, 3/3, posted on website
• No late problem sets accepted
• Work in groups but turn in own assignment, list
  all names
• One midterm, in class 2/8, 35 of grade
• Cumulative final exam, 3/17, 800-1100, 50 of
  grade
• All readings through electronic course reserves
• Attendance!

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Office hours

• Prof. Gordon
• Economics 328, Tuesdays 300-400 p.m.
• Patricia Tong
• Sequoyah 139, Mondays 1000-1100 a.m.

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Outline for this week

• Today
• Why economists care about education
• The US educational system in context
• Thursday
• Overview of empirical methods
• Gruber Ch. 3 only on e-reserve

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The case for public sector involvement in
education

• Credit market failures
• Externalities
• Productive workforce
• Informed citizens
• Reduced crime
• Assimilation of new immigrants
• Redistribution

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Market for education with positive externality

Marginal External Benefit
Marginal Social Cost Marginal Private Cost
Marginal Social Benefit MPBMEB
Marginal Private Benefit
Q
Qsoc
Qpvt
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Virtues of the US system Goldin (2003)

• US system broke from European ones
• US virtues
• Funded by government
• Decentralized
• Open to all
• Academic
• Not religious
• Gender neutral

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Overview of US educational system

• Demand side how much education do people get?
• Supply side how much does education cost to
  produce? Who pays, and for what?

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Highest level of education attained by persons 25
years and older March 2001
SOURCE U.S. Department of Commerce, Bureau of
the Census, Current Population Survey,
unpublished data.
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Years of school completed by persons 25 to 29
years of age 1940 to 2001
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Median annual income of persons with income 25
years old and over, by highest degree attained
and sex 2000
SOURCE U.S. Department of Commerce, Bureau of
the Census, Current Population Reports, Series
P-60, "Money Income in the United States 2000."
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Unemployment rates of persons 25 years old and
over, by highest level of education 2001
SOURCE U.S. Department of Labor, Bureau of Labor
Statistics, Office of Employment and
Unemployment Statistics, Current Population
Survey, 2001.
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Public direct expenditures for education as a
percentage of the gross domestic product
Selected countries, 1998
Includes all government expenditures for
education institutions.SOURCE Organization for
Economic Cooperation and Development, Education
at a Glance, 2001.
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Sources of revenue for public elementary and
secondary schools 1970-71 to 1999-2000
Source Digest of Education Statistics, 2002.
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Current expenditure per pupil in average daily
attendance in public elementary and secondary
schools 1970-71 to 2001-02
Source Digest of Education Statistics, 2002.
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Average annual salary for public elementary and
secondary school teachers
Source Digest of Education Statistics, 2002.
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http//www.futureofchildren.org/usr_doc/vol7no3ART
8.pdf