This review culls noneconomic literature on education--by sociologists, anthropologists, and practitioners to present a new economic theory of students and schools. This theory elaborates two themes that have eluded economic analysis. First is the student as decision-maker whose primary motivation is her identity. Second is a conception of the school as a social institution. This framework suggests a new perspective on questions such as resource allocation and school reform. It explains why some educational policies succeed and others fail. We show how sociological variables may affect outcomes, and suggest ways economists can incorporate them into theoretical and empirical research.
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Key review of human capital and signalling models after 1986.
The author models standards for educational credentials, such as high-school diplomas. Standard-setters maximize their conception of social welfare, knowing that utility-maximizing students choose whether to meet the standard. The author shows that more egalitarian policymakers set lower standards, the median voter would prefer higher standards (under symmetric distributions), and decentralization lowers standards (among identical communities). Optimal standards do not necessarily fall with increased student preference for leisure, deterioration of nonstudent inputs to education, or increased student heterogeneity. Superseding binary credentials by perfect information increases average achievement and social welfare for plausible degrees of heterogeneity, egalitarianism, and pooling under decentralization. Copyright 1994 by American Economic Association.
A theoretical and computational model with tax-financed, tuition-free public schools and competitive, tuition-financed private schools is developed. Students differ by ability and income. Achievement depends on own ability and on peers' abilities. Equilibrium has a strict hierarchy of school qualities and two-dimensional student sorting with stratification by ability and income. In private schools, high-ability, low-income students receive tuition discounts, while low-ability, high-income students pay tuition premia. Tuition vouchers increase the relative size of the private sector and the extent of student sorting and benefit high-ability students relative to low-ability students.
Classroom education has public good aspects. The technology is such that when one student disrupts the class, learning is reduced for all other students. A disruption model of educational production is presented. It is shown that optimal class size is larger for better-behaved students, which helps explain why it is difficult to find class size effects in the data. Additionally, the role of discipline is analyzed and applied to differences in performance of Catholic and public schools. An empirical framework is discussed where the importance of sorting students, teacher quality, and other factors can be assessed.
This paper considers methods for modelling the production function for cognitive achievement in a way that captures theoretical notions that child development is a cumulative process depending on the history of family and school inputs and on innate ability. It develops a general modelling framework that accommodates many of the estimating equations used in the literatures. It considers different ways of addressing data limitations, and it makes precise the identifying assumptions needed to justify alternative approaches. Commonly used specifications are shown to place restrictive assumptions on the production technology. Ways of testing modelling assumptions and of relaxing them are discussed.
Key review of human capital and signalling models before 1986.
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