Standards, Inequality in Education and Efficiency
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Jun 1, 2015
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Abstract
We develop a model of educational standards that includes inequality in educational opportunities. Our model shows that policymakers setting an output maximizing standard need to consider structural factors such as inequality of income and opportunity, skill mismatch in the economy, profit and wage shares and labor market imperfections. High standards are not optimal under severe educational inequality; they lead to lower output when many cannot access quality education. Optimal standard rises along with increasing opportunities for poor students. Targeted subsidies enhance both distributional and efficiency-related objectives. Other effective policies to extend skilled labor and to improve poor workers income are remedying information problems between employers and workers and distributing more of output gains toward labor.
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Koc, S. and Erkin, H. (2015) “Standards, Inequality in Education and Efficiency”, World Journal of Applied Economics, 1(1), pp. 21-43. doi: 10.22440/EconWorld.J.2015.1.1.SK.0004.
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References
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Niu, S. and Tienda, M. (2013). High School Economic Composition and College Persistence. Research in Higher Education, 54(1), 30-62. DOI: 10.1007/s11162-012-9265-4.
Reardon, S.F. (2011). The Widening Academic Achievement Gap Between the Rich and the Poor: New Evidence and Possible Explanations, in Whither Opportunity?, ed. by G.J. Duncan and R.J. Murnane, Russell Sage Foundation Press: New York.
Spence, M. (1973). Job market signalling, Quarterly Journal of Economics, 87(3), 355–74. DOI: 10.2307/1882010.
Williams Shanks, T.R. and Robinson, C. (2013). Assets, economic opportunity and toxic stress: A framework for understanding child and educational outcomes. Economics of Education Review, 33, 154-170. DOI: 10.1016/j.econedurev.2012.11.002.
Backes-Gellner, U. and Veen, S. (2006). Incentives for Schools, Educational Signals and Labour Market Outcomes. Working Paper, Institute for Strategy and Business Economics, University of Zurich. http://www.isu.uzh.ch/leadinghouse/WorkingPapers/0009_lhwpaper.pdf.
Bailey, M.J. and Dynarski, S.M. (2011). Changing inequality in US college entry and completion. NBER Working Paper 17633. http://www.nber.org/papers/w17633.
Berg, A. and Ostry, J.D. (2011). Inequality and Unsustainable Growth: Two Sides of the Same Coin?. IMF Staff Discussion Note 11/08. Washington: International Monetary Fund.
Betts, J. R. (1998). The Impact of Educational Standards on the Level and Distribution of Earnings. The American Economic Review, 88(1), 266-275.
Betts, J.R. and Grogger, J. (2003). The impact of grading standards on student achievement, educational attainment, and entry-level earnings. Economics of Education Review, 22(4), 343-352. DOI: 10.1016/S0272-7757(02)00059-6.
Bishop, J. H. (2004). Drinking from the fountain of knowledge: Student incentive to study and learn - externalities, information problems and peer pressure. CAHRS Working Paper #04-15, Cornell University, NY.
Bishop, J. (2005). High School Exit Examinations: When Do Learning Effects Generalize?. Yearbook of the National Society for the Study of Education, 104(2), 260–288. DOI: 10.1111/j.1744-7984.2005.00033.x.
Bjorklund, A. and Salvanes, K.G. (2011). Education and Family Background: Mechanisms and Policies, in Handbook of the Economics of Education, ed. by E.A. Hanushek, S. Machin and L. Woessmann, , Elsevier. DOI: 10.1016/B978-0-444-53429-3.00003-X.
Bonesronning, H. (2004). Do the teachers' grading practices affect student achievement?. Education Economics, 12(2), 151-167. DOI: 10.1080/0964529042000239168.
Costrell, R. M. (1994). A Simple Model of Educational Standards. American Economic Review, 84(4), 956-971.
De Carvalho Andrade, E. and De Castro, L.I. (2011). Tougher Educational Exam Leading to Worse Selection. Economics: The Open-Access, Open-Assessment E-Journal, 5(17). DOI: 10.5018/economics-ejournal.ja.2011-17.
De Fraja G., T. Oliveira and Zanchi, L. (2010). Must Try Harder: Evaluating the Role of Effort in Educational Attainment. Review of Economics and Statistics, 92(3), 577-597. DOI: 10.1162/REST_a_00013.
De Paola M. and Scoppa, V. (2007). Returns to Skills, Incentives to Study and Optimal Educational Standards. Journal of Economics, 92(3), 229-262. DOI: 10.1007/s00712-0070288-9.
De Paola, M. and Scoppa, V. (2010). A signalling model of school grades under different evaluation systems. Journal of Economics, 101(3), 199-212. DOI: 10.1007/s00712-010-0145-0.
Delaney, L., C. Harmon and Redmond, C. (2011). Parental education, grade attainment and earnings expectations among university students. Economics of Education Review, 30(6), 1136-1152. DOI: 10.1016/j.econedurev.2011.04.004.
Easterly, W. (2007). Inequality Does Cause Underdevelopment: Insights from a New Instrument. Journal of Development Economics, 84(2), 755–76. DOI: 10.1016/j.jdeveco.2006.11.002.
Figlio, D.N. and Lucas, M.E. (2004). Do high grading standards affect student performance?. Journal of Public Economics, 88(9-10), 1815– 1834. DOI: 10.1016/S0047-2727(03)00039-2.
Giorgio, B. and Checchi, D. (2007). Does school tracking affect equality of opportunity? New international evidence. Economic Policy, 22(52), 781-861. DOI: 10.1111/j.1468-0327.2007.00189.x.
Guimaraes, J. and Sampaio, B. (2013). Family background and students' achievement on a university entrance exam in Brazil. Education Economics, 21(1), 38-59. DOI: 10.1080/09645292.2010.545528.
Hanushek, E.A. and Wossmann, L. (2007). The Role of Education Quality in Economic Growth. World Bank Policy Research Working Paper 4122. https://openknowledge.worldbank.org/bitstream/handle/10986/7154/wps4122.pdf.
Heckman, J. (2008). Schools, Skills, and Synapses. Economic Inquiry, 46(3), 289-324. DOI: 10.1111/j.1465-7295.2008.00163.x.
Kornrich, S. and Furstenberg, F. (2013). Investing in Children: Changes in Parental Spending on Children, 1972–2007, Demography, 50(1), 1-23. DOI: 10.1007/s13524-012-0146-4.
Lochner, L. and Monge-Naranjo, A. (2011). Credit Constraints in Education. NBER Working Papers 17435, Cambridge, Mass.: National Bureau of Economic Research. DOI: 10.3386/w17435.
Niu, S. and Tienda, M. (2013). High School Economic Composition and College Persistence. Research in Higher Education, 54(1), 30-62. DOI: 10.1007/s11162-012-9265-4.
Reardon, S.F. (2011). The Widening Academic Achievement Gap Between the Rich and the Poor: New Evidence and Possible Explanations, in Whither Opportunity?, ed. by G.J. Duncan and R.J. Murnane, Russell Sage Foundation Press: New York.
Spence, M. (1973). Job market signalling, Quarterly Journal of Economics, 87(3), 355–74. DOI: 10.2307/1882010.
Williams Shanks, T.R. and Robinson, C. (2013). Assets, economic opportunity and toxic stress: A framework for understanding child and educational outcomes. Economics of Education Review, 33, 154-170. DOI: 10.1016/j.econedurev.2012.11.002.