Government Finance- education chapter 11 – Flashcards
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Productivity (why should government be involved in education)
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Society can benefit from the higher standard of living that comes with increased productivity. -Spill over: Ex Working with smarter people will make you smarter -Taxes: More income means higher tax revenues
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Citizenship
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Education may make citizens more informed and active voters, improving the quality of the democratic process.
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Educational credit market failure
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The failure of the credit market to make loans that would raise total social surplus by financing productive education. o Without public education, many families would borrow money for their children's education. o This market likely would not function well. EX: Not having enough money for college, so taking out loans is the option.
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Failure to maximize family utility
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Parents may not choose an appropriate level of education for their children.
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Redistribution
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o As long as education is a normal good, higher-income families would provide more education. o Income mobility has long been a stated goal for most democratic societies, and public education supports this goal. example: richer families will have more education because they can afford it more
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Educational vouchers: ( solving the effect Crowding Out)
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A fixed amount of money given by the government to families with school-age children, who can spend it at any type of school, public or private.
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Consumer sovereignty (Voucher proponents make two arguments for them)
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ouchers allow individuals to more closely match their educational choices with their tastes
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Competition (Voucher proponents make two arguments for them)
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Vouchers allow the education market to benefit from the competitive pressures that make private markets function efficiently
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Vouchers may lead to excessive school specialization. (Critics make several arguments against vouchers)
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By focusing on particular market segments, schools give less focus to the key elements of education. Ex: some schools specializing on football more than the academics
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Vouchers will lead to segregation (Critics make several arguments against vouchers)
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Critics of voucher systems argue that vouchers have the potential to reintroduce segregation along many dimensions, such as race, income, or child ability
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Vouchers are an inefficient and inequitable use of public resources. (Critics make several arguments against vouchers)
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With vouchers, total public-sector costs would rise, as the government would pay part of the private school costs that families currently pay
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The education market may not be competitive. ( Critics make several arguments against vouchers)
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The education market is described more closely by a model of natural monopoly, with efficiency gains to having only one monopoly provider of the good.
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The costs of special education (Critics make several arguments against vouchers)
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Each child would be worth a voucher amount that represents the average cost of educating a child in that town in that grade, but all children do not cost the same to educate. o Students with disabilities cost about twice as much to educate as students without.
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EVIDENCE: Estimating the Effects of Voucher Programs
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Read more
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Magnet schools (Experience with Public School Choice)
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Special public schools set up to attract talented students or students interested in a particular subject or teaching style.
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Charter schools (Experience with Public School Choice)
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Schools financed with public funds that are not usually under the direct supervision of local school boards or subject to all state regulations for schools.
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Bottom Line on Vouchers and School Choice
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• Evidence is mixed. • Generally suggests that vouchers improve educational outcomes. • They come at the cost of potentially increasing inequality in educational achievement. • Some sort of guarantee of access must be provided to ensure all students have an education.
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Returns to education
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: The benefits that accrue to society when students get more schooling or when they get schooling from a higher-quality environment. • More education clearly leads to higher wages. • Interpretation of this correlation is controversial
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Human capital (Effects of Education Levels on Productivity)
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A person's stock of skills, which may be increased by further education. Leads to growth and higher income
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Screening (Effects of Education Levels on Productivity)
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A model that suggests that education provides only a means of separating high-ability individuals from low-ability individuals and does not actually improve skills. ex: jobs screening to see if you have a degree ( to see who is more motivated)
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Policy implications- Human capital
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: Government would want to support education to raise their productivity
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Policy implication- Screening
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: Education does not raise productivity, so there is no reason to support it.
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Differentiating the theories (Human capital and Screening)
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o Most of the returns to education reflect accumulation of human capital. o Some screening value to obtaining a high school or higher education degree.
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Better-educated people
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• Participate more politically • Perform fewer criminal acts • Have better health and healthier children • Have better educated children • Have more productive coworkers
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State Provision (Current Government Role)
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The primary form of government financing of higher education is direct provision of higher education through locally and state-supported colleges and universities
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Pell Grants (Current Government Role)
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The Pell Grant program is a subsidy to higher education administered by the federal government that provides grants to low-income families to pay for their educational expenditures.
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Direct student loans ( Current Government Role- loans)
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Loans taken directly from the U.S. Department of Education.
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Guaranteed student loans ( Current Government Role- loans)
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Loans taken from private banks for which the banks are guaranteed repayment by the government
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tax relief
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series of tax breaks for college-goers and their families -Tax credits for families that send their children to college -Alternatively, deductions for educational expenses
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Conclusion
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The provision of education, an impure public good, is one of the most important governmental functions in the United States and around the world. • The optimal amount of government intervention in education markets depends on the extent of market failures in private provision of education and on the public returns to education.
