Research projects

The objective of this project was to investigate how the quality of the education system can influence decisions to invest in higher education (secondary and tertiary), which can in turn affect the development of economies. The analysis framework is a general equilibrium model with overlapping generations in which the source of growth in the economy is the accumulation of physical and human capital. The economy is characterised by the output per worker and the evolution of this variable depends on the quality of the education system. Given the quality of the education system, individuals optimally decide how much to invest in education, taking into account their abilities. The results of the model show two channels through which the quality can affect the accumulation of human capital. On the one hand, a low-quality education system acts as a barrier to the entrance of investment in higher education (extensive channel). On the other hand, once individuals decide to invest in higher education, the higher the quality of the education system, the greater the investment in secondary and tertiary education made by each individual (intensive channel). Using data on the results of internationally comparable examinations among students of secondary education age and the rankings of universities, the empirical evidence shows that the channels are quantitatively important. In particular, other factors remaining constant, the countries with the highest quality education systems have a higher percentage of the population with secondary and university studies. In addition, monitoring the education stock, a greater quality of the education system implies greater investment in education, measured by an increase in secondary and university enrolment rates and the average number of years of secondary and tertiary education. Finally, in the estimation of a standard growth equation, it is shown that, in line with the implications of the theoretical model, the positive effect of the quality of the education system is found only when the quality of the education is relatively high, which suggests that quality does not affect growth unless the students acquire a minimum level of knowledge.