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2952331 Public Economics

Education
Instructor:
Touchanun Komonpaisarn, Ph.D.
Faculty of Economics
Section 1 Semester 1/2557
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Education
• University Education: Positive externalities?
• Characteristics of positive Externalities:
1. ______________________
2. ______________________
3. ______________________
• Those with university education normally have __________
wage they are already compensated!
• The higher the level of education, the smaller the size of
positive externalities.
• Do you think we should use tax revenue to finance public
(university) education?
• Human Capital Vs. Physical Capital.

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Benefits of Education
• Does higher education make people more productive?
• Positive correlation is found.
• In the Human Capital Theory, Becker (1964) believe that education is one
channel for a person to accumulate his/her human capital level that can
be used to improve productivity level.
• As long as productivity is reflected in higher wages, we would say that
higher education is associated with higher productivity.
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Benefits of Education
• Another explanation comes from a paper by Spence (1973), which said
that higher education only serves as a signaling device (of preexisting
ability) for future employers, education does not actually leads to higher
productivity.
• Signaling Theory
– Those who can complete college education successfully just show to their
future employers that they have high enough ability.
– Pooling Equilibrium VS. Separating Equilibrium
– 2 types of students:
– Wage function:
– Cost of studying:
– Decisions to attend school (college):

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Government Intervention in Education
• Public Education
• Why free public schools?
• On efficiency ground, education should be ___________
because it provides both private benefits to individuals and
external benefits to society.
• Private benefits to individuals are in the form of
_____________________________________.
• If we allow free market to provide education, we will find a lot
of private schools focusing only
on________________________.

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Government Intervention in Education
• Public Education
• That’s why we need the government to provide ___________
schools, so that other important skills are emphasized.
1.
2.
3.
• Although we don’t have free education in Thailand, many
developed countries provide free education to their citizen
especially the elementary and secondary level, why is that?
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Government Intervention in Education
• Income=I, price of other goods = 1

How does a household BL look like?
• If free public education is provided at E
p
level, how does it affect the BL?

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Other Goods
Education Spending
Government Intervention in Education
• Public Education: First Scenario
• Free public education leads to lower education: IC is quite_________.
• Education is _____________________________ to the household.
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Other Goods
Education Spending
Government Intervention in Education
• Public Education: Second Scenario
• Free public education leads to higher education: IC is _________.
• Education is _________________________ to the household.

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Other Goods
Education Spending
Government Intervention in Education
• Public Education: Third Scenario
• Free public education leads to unchanged level of education: IC is
_____________.
• Education is _________________________________ to the household.

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Other Goods
Education Spending
Government Intervention in Education
• Vouchers
• Pros.:
– Each family would be given a tuition voucher that could be redeemed
at any private school.
– This will _________ competition in the education market.
– Public schools with poor quality will___________ their students to
higher-quality private schools.
– Each family will send their kids to schools based only on___________
as they no longer have financial constraint.
– It will also __________ the diversity among schools.
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Government Intervention in Education
• Income=I, price of other goods = 1. How does a household BL look like?
• If instead of free public education, a voucher with value V Baht is given to
every household, how does it affect the BL?
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Other Goods
Education Spending
Government Intervention in Education
• Vouchers
• Cons.:
– The problem of asymmetric information.
– Private schools may focus on different aspects of education from
public schools.
– Brain drain.
– If a family would send their kids to a private school anyway, the
introduction of voucher would just _________ their income
• They are generally __________ people, so income inequality tend to
get____________ with voucher system.

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