Economics of Education
Each person’s education is an investment in her human capital which allows her to contribute to her society in a productive way. Consequently, the education of the people forms a crucial determinant of an economy’s capability to achieve high growth with high wages, low unemployment and strong social cohesion. It is therefore vital for the European Union to ensure a high-level high-quality education for all its population, requiring appropriate educational investments and an efficient use of given educational resources, as well as an equitable distribution of educational opportunities. In the competitive and dynamic environment of modern knowledge-based economies, education policies take centre stage and, if rightly conceived, can take on roles formerly mainly confined to physical-investment or social-protection policies.
The analysis of the economic and social determinants and consequences of education is the realm of the economics of education. Education economists analyse the effects of education on wages, employment, economic growth and social equity, while also covering non-monetary outcomes and external effects of human-capital accumulation. They scrutinize the role of education in a society’s capability to advance knowledge through research, entrepreneurship and innovation. They estimate how family backgrounds, schools’ resource endowments and institutional features of the education systems determine the quality of education, using observational and experimental data to estimate the effectiveness of education policy interventions. They deal with the public and private financing of different levels of education from pre-school learning to on-the-job training and compare the benefits of each type of education to its costs. And they explore the opportunities and limitations that the employment of markets and incentive-creating institutions in general can bring to an efficient use of scarce resources in the different forms of learning throughout life. The knowledge created by the economics of education can thus assist governments in optimising their policies through better-informed choices, thereby helping to reach the goal of sustainable and equitable growth with an encompassing participation of all citizens.
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