Interplay of Public and Private Educational Spending: Macroeconomic Implications

Abstract

This paper investigates the implications of the collaboration between public and private human capital investments on GDP per capita and income inequality. It extends an overlapping generations model with heterogeneous agents and endogenous growth that allows for educational investments through public and private sources. The theory is empirically evaluated with two cross-country dynamic panel data models. A key finding suggests that an increasing gap between public and private education investment, with the public remaining larger than private, increases GDP per capita while reducing income inequality. These results reflect the potential of further studying the interplay of sources of educational funding.

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