Economics of Education
Lovenheim and Turner, Economics of Education
Total resource policies increase the total amount of funding to a school or to individuals making education decisions. (eg: increasing the total amount of funding available to schools; giving money to parents or students)
Input-based policies are targeted at specific inputs to the education process, such as class sizes, teachers, or the offering of certain educational programs. (eg: These policies can work through government mandates (such as smaller classes), or they can work by explicitly altering prices through subsidies and taxes. For example, the government could provide a subsidy for every highly qualified teacher hired by a school)
Output-based policies alter the incentives faced by individuals and schools, with the objective or promoting certain educational outcomes. (School choice policies increase competition for students by allowing them to choose which local school to attend without forcing their parents to move. Another example is teacher merit pay (or incentive pay), which ties teacher compensation directly to measured education outcomes.
Education markets typically are not perfectly competitive markets (perfect competition) as there are barriers to entry and exit of schools and colleges.
Education can have spillovers (externalities) to other people in the society through the benefits (or costs) that accrue to a society with well-educated citizens.
Education is a highly differentiated good: There is not just one type of education but considerable differences in what schools and colleges teach, how material is taught and the level of resources devoted to production.
The supply of education services is often local: usually one must be close to a school to take advantage of its offerings.
Education services may be subject to asymmetric information, as students and parents may have a difficult time assessing the quality of educational offerings.
The quality of education one receives can be influenced by the characteristics of other consumers—peer effects.
Education is a customer input technology: the amount of effort students exert affects learning.
The roles of government in the market for education are threefold:
- Local and state governments participate in the production of education. They provide education services directly.
- Governments, including legislatures and the judiciary, set the rules of the market through regulations. These regulations can specify the type of education that will be provided, the method of production, prices associated with education services, funding levels, and resource allocation.
- The government provides public funding or subsidies to virtually all education markets in the United States.
Lundberg (JLE, 2013) The College Type: Personality and Educational Inequality
This paper applies a stratification of family SES to study the effects of cognitive ability and personality traits on college graduation. The paper applies linear probability model that treats personality as a set of unobserved latent traits. Conscientiousness, which has been linked in past research to school success, was found to have no significant impact on the education of disadvantaged men, while openness to experience was an important correlate of college graduation only for less-advantaged men and women. Agreeableness and emotional stability have reasonably consistent positive effects on education for all groups.