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Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/200774
Public overspending in higher education
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We study the trade-off between governmental investments in pretertiary and tertiary education from an efficiency point of view. We develop a model comprising agents with different incomes and abilities, public and private schools, and public universities that select applicants based on an admission exam. Reallocating governmental resources from tertiary to pretertiary education may positively affect aggregate production and human capital if some conditions are satisfied. For instance, in an economy with a high proportion of credit-constrained students, a reallocation of expenditure toward public schools benefits many students, compensating for the negative effect of a decrease in public university investments. We also quantitatively investigate the optimal allocation of public investment between pretertiary and tertiary education, and we find that a 10% increase in productivity of public investments in pretertiary education could increase the optimal GDP between 2.1% and 3%.
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BROTHERHOOD, Luiz and DELALIBERA, Bruno R. Public overspending in higher education. Bulletin of Economic Research. 2023. Vol. 75, num. 3, pags. 588-608. ISSN 0307-3378. [consulted: 16 of October of 2026]. Available at: https://hdl.handle.net/2445/200774