The Political Economy of Education

Chapter 22 addresses two important questions in the public financing of education. The first is how much money in the form of taxes should a society collect and spend on education (public effort) and what are the political and economic factors that affect the government’s ability to increase public spending on education. The discussion includes a review of the rationale for public spending on education because of “externalities” in the form of social benefits resulting from educational investments and the public good aspects of education. The second question is who is to pay for the education—this is primarily an issue of the kinds of taxes to be levied to raise revenue for providing educational services and the degree to which and the possible reasons why some countries choose to have more privately financed education. A closely related issue covered in the chapter is why in other countries, the public sector chooses to substantially subsidize private education, which, on its face, appears to be policy that shifts resources to middle and possibly higher income earners.