Public education expenditures and growth

Empirical evidence is mixed concerning the effects of public education expenditures on economic growth. We explore this expenditure-growth relationship in the context of an endogenous growth model in which private and public investment are inputs to human capital accumulation. The positive direct effect of public education spending on growth can be diminished or even negated when other determinants of growth are negatively affected by general equilibrium adjustments. We show that the response of growth to public education expenditures may be nonmonotonic over the relevant range. The relationship depends on the level of government spending, the tax structure and the parameters of production technologies. (C) 2003 Elsevier B.V. All rights reserved.