No. 89. EDUCATION POLICY, GROWTH AND WELFARE
N. Benos. 2007.
This paper studies the general equilibrium implications of two types of education policy in an overlapping generations model. We examine vouchers, which augment inherited private education spending, and public investment on economy-wide human capital, that provides externalities to individual human capital accumulation. The government determines jointly the tax rate and the allocation of tax revenues among the two types of education policy. The optimal division of public spending between the education policy instruments and the associated tax rate depend on the elasticities of human capital accumulation with regard to vouchers and public investment on economy-wide human capital.