Optimal education policies and comparative advantage

We consider the optimal education policies of a small economy whose government has a limited budget. Initially, the economy is closed and the government chooses its education policy to maximize welfare under autarky. When the economy trades with the rest of the world the government chooses a new edu...

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Bibliographic Details
Published inPacific economic review (Oxford, England) Vol. 16; no. 5; pp. 538 - 552
Main Authors Bougheas, Spiros, Kneller, Richard Anthony, Riezman, Raymond Glenn
Format Journal Article
LanguageEnglish
Published Melbourne, Australia Blackwell Publishing Asia 01.12.2011
Blackwell Publishing Ltd
Subjects
Bildungspolitik
Comparative advantage
Education policy
Effekt
Foreign aid
Internationale Beziehungen
Kostenvergleich
Sozialhilfe
Studies
Unabhängigkeit
Vorteil
Welfare economics
Wirtschaft
Öffentliche Ausgaben
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Summary:We consider the optimal education policies of a small economy whose government has a limited budget. Initially, the economy is closed and the government chooses its education policy to maximize welfare under autarky. When the economy trades with the rest of the world the government chooses a new education policy that maximizes welfare under trade. Is it ever optimal for the government to choose its new policy so that it reverses the economy's comparative advantage? We find that if the budget stays fixed when it is optimal to ‘move up the skills chain’ it is not feasible. In such a case, a foreign loan is welfare improving. A move in the opposite direction can be optimal, and when it is optimal it is also feasible.
Bibliography:istex:0B03BA8FC0A3339AAD4E1DD64140B29C6113DBC6
ark:/67375/WNG-3QS84NGT-5
ArticleID:PAER563
ISSN:1468-0106
1361-374X
1468-0106
DOI:10.1111/j.1468-0106.2011.00563.x