Duhalde (2007) engages in a speech at Bowdoin College about student debt. In the speech entitled, “Education is a Right – Not a Privilege.” He emphasises the reality of student debts and states that education, a right, should be availed to all, despite the debts. Instead education should be subsidesed to assist the worse off students. However, views as to whether education should be subsidised or not vary.
In the American context, it is noted that there has been a rise in subsidies since the 1970s, encouraging people to enter college who otherwise would not have. This is seen as something that is “not necessarily a good thing” by Vedder (as cited in Sullum, 2007. Vedder (as cited in Sullum, 2007) argues that "we probably have over-invested in higher education," attracting marginal students who never graduate. Sullum (2007) agrees that Vedder’s (as cited in Sullum, 2007) comment is logical, since anyone who can finish college and reap the typically large returns from doing so should be able to finance tuition through market-rate loans, private aid, or some combination of the two. Wolfram (as cited in Sullum 2007) highlights that these education subsidies lead to inflation, which is a reason good enough to reduce education subsidies. In addition, Sullum’s (2007) argument is that if education is such a good investment, why should the government subsidise it, given its negative attributes?
Rosen (2001) makes an interesting contribution against subsidisation. According to Rosen (2001), subsidising education however does not guarantee and increase ‘consumption’ of education by individuals. This is also another aspect that can be considered to avoid subsidising education. This however contradicts the work by where he states the willingness of parents to invest in higher education increases when parents get financial aid.
All in all, a number of authours (Bishop, 1976; Schultz, 2002; Lommerud, 1989; Zhang, 1996; Glomm & Ravikumar, 1992; and Eckstein & Zilcha 1994) agree that education should be subsidised. Lommerud (1989) manages to show that indeed education should be subsidised. The reasons Lommerud (1989) cites are that educational decisions are undertaken to maximise lifetime utility. As a result it, is becomes optimal to tax the more wealthy to finance educational subsidies to restore people’s incentives to engage in education.
However, deciding whether or not to subsidise education is an intricate process because there are many facets of education. There is, therefore, a need to clearly distinguish between the different types of education and then decide on which category to subsidise. Education subsidisation can be categorised according to subject, gender, education level or depending on ownership of the educational institution (which are only a few of the categories).
Bishop (1976) argues that education especially in the science field should be subsidised as long as it brings benefits to the greater economy. With regard to education of girls, according to Schultz (2002), advocates that, though the incomes of males and females increase equally as workers advance in their education, the marginal returns of women exceed those of males especially in countries where women are much less educated. Schultz (2002) argues that more educated women work more hours in the market labor force, broadening the tax base and thereby potentially reducing tax distortions. These three conditions, justify the disproportionate allocation of public expenditures toward women's education. Dur and Teuling‘s (2001), debate on education subsidisation is centralised on whether subsidisation of education should be done for education into primary education or high school education or tertiary (higher) education. According to Dur and Teuling (2001), the usual argument against subsidies to education above the primary level is that the rich take up most education, so a subsidy would increase inequality. Zhang (1996), Glomm and Ravikumar (1992) and Eckstein and Zilcha (1994) recognise two categories of education which are private education and public education.
According to the work by (Bishop, 1976; Schultz, 2002; Lommerud, 1989; Zhang, 1996; Glomm & Ravikumar, 1992; and Eckstein & Zilcha 1994) this paper supports the fact that there is really a need to subsidise education. However this paper goes a step further and seeks to determine which education category should be subsidised, between private education and public education.
Zhang (1996), Glomm and Ravikumar (1992) and Eckstein and Zilcha (1994), on the other hand, analyses the impact of subsidies on two categories of education which are private education and public education. From the findings of Glomm and Ravikumar (1992), subsidisation of private education leads to lower per capita income that private education unless initial; income inequality is high. In addition they find that public education not only reduces income inequalities but it also increases the median agents welfare as long as the median agent’s income is below average. Eckstein and Zilcha (1994), in support of the findings by Glomm and Ravikumar (1992), find that compulsory public schooling financed by proportional tax, causes faster growth and also reduces income inequality education.
Zhang (1996) shows that subsidising private education speeds up growth and improves welfare. Because of this, under unanimous voting, societies choose to subsidise private education. Providing public education, on the other hand, may reduce both the growth rate of the average income and the median agent's welfare. Because of this, under majority voting, the median agent also prefers subsidised private education to public education unless initial income inequality is sufficiently high. Thus, the decision to subsidise depends on the nature of the society, whether is characterised by a people who earn high incomes or people who earn less than the average income. Zhang (1996) concludes that the novel implication is that a society may start with public education when initial income inequality is high, and will replace it with subsidised private education in a certain number of periods as income inequality diminishes.
It is therefore, the part of the South African government to determine the income inequality of the country and subsidise in the private and public education depending on the welfare of the people in order to make the subsidies as efficient as possible.
Bibliography
Bishop, J. 1976. “Subsidising Science through Education,” Society Journal, Vol. 13, No. 2, p.34-43.
Duhalde, D., (2007). “Education is a Right – Not a Privilege.” speech at Bowdoin College. Available online at http://theactivist.org/blog/education-is-a-right-not-a-privilege Access 30 August 2009
Dur, R. and Teuling, C. N., 2001. “Education and Efficient Redistribution,” CESifo Working Paper Series No. 592 Available online at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=288946 Access 28 August 2009
Eckstein, Z., and Zilcha, I., 1994., “The effect of compulsory schooling on growth, income distribution and welfare,” Journal of Public Economics, Vol. 54, p.339-59,
Glomm, G., and Ravikumar, B., 1992. ”Public versus private investment in human capital: Endogenous growth and income inequality,” Journal of Political Economy, Vol. 100 No.4, p. 818-34,
Lommerud K. E. (1989), “Educational Subsidies When Relative Income Matters” *Oxford Economic Papers Vol. 41, P.640-652
Schultz, T. P., 2002. “Why Governments Should Invest More to Educate Girls,” World Development Vol. 30, Iss. 2, p.207-225
Sullum, J., 2007. “ Jumping the loan shark: If college is a good investment, why should the government subsidise it?” Availabel online at http://www.reason.com/news/show/117910.html Access 30 August 2009
Zhang, J., 1996. “Optimal Public Investments in Education and Endogenous Growth,” The Scandinavian Journal of Economics, Vol. 98, No. 3 (Sep.,), pp. 387-404
http://www.jstor.org/stable/pdfplus/3440733.pdf
In the American context, it is noted that there has been a rise in subsidies since the 1970s, encouraging people to enter college who otherwise would not have. This is seen as something that is “not necessarily a good thing” by Vedder (as cited in Sullum, 2007. Vedder (as cited in Sullum, 2007) argues that "we probably have over-invested in higher education," attracting marginal students who never graduate. Sullum (2007) agrees that Vedder’s (as cited in Sullum, 2007) comment is logical, since anyone who can finish college and reap the typically large returns from doing so should be able to finance tuition through market-rate loans, private aid, or some combination of the two. Wolfram (as cited in Sullum 2007) highlights that these education subsidies lead to inflation, which is a reason good enough to reduce education subsidies. In addition, Sullum’s (2007) argument is that if education is such a good investment, why should the government subsidise it, given its negative attributes?
Rosen (2001) makes an interesting contribution against subsidisation. According to Rosen (2001), subsidising education however does not guarantee and increase ‘consumption’ of education by individuals. This is also another aspect that can be considered to avoid subsidising education. This however contradicts the work by where he states the willingness of parents to invest in higher education increases when parents get financial aid.
All in all, a number of authours (Bishop, 1976; Schultz, 2002; Lommerud, 1989; Zhang, 1996; Glomm & Ravikumar, 1992; and Eckstein & Zilcha 1994) agree that education should be subsidised. Lommerud (1989) manages to show that indeed education should be subsidised. The reasons Lommerud (1989) cites are that educational decisions are undertaken to maximise lifetime utility. As a result it, is becomes optimal to tax the more wealthy to finance educational subsidies to restore people’s incentives to engage in education.
However, deciding whether or not to subsidise education is an intricate process because there are many facets of education. There is, therefore, a need to clearly distinguish between the different types of education and then decide on which category to subsidise. Education subsidisation can be categorised according to subject, gender, education level or depending on ownership of the educational institution (which are only a few of the categories).
Bishop (1976) argues that education especially in the science field should be subsidised as long as it brings benefits to the greater economy. With regard to education of girls, according to Schultz (2002), advocates that, though the incomes of males and females increase equally as workers advance in their education, the marginal returns of women exceed those of males especially in countries where women are much less educated. Schultz (2002) argues that more educated women work more hours in the market labor force, broadening the tax base and thereby potentially reducing tax distortions. These three conditions, justify the disproportionate allocation of public expenditures toward women's education. Dur and Teuling‘s (2001), debate on education subsidisation is centralised on whether subsidisation of education should be done for education into primary education or high school education or tertiary (higher) education. According to Dur and Teuling (2001), the usual argument against subsidies to education above the primary level is that the rich take up most education, so a subsidy would increase inequality. Zhang (1996), Glomm and Ravikumar (1992) and Eckstein and Zilcha (1994) recognise two categories of education which are private education and public education.
According to the work by (Bishop, 1976; Schultz, 2002; Lommerud, 1989; Zhang, 1996; Glomm & Ravikumar, 1992; and Eckstein & Zilcha 1994) this paper supports the fact that there is really a need to subsidise education. However this paper goes a step further and seeks to determine which education category should be subsidised, between private education and public education.
Zhang (1996), Glomm and Ravikumar (1992) and Eckstein and Zilcha (1994), on the other hand, analyses the impact of subsidies on two categories of education which are private education and public education. From the findings of Glomm and Ravikumar (1992), subsidisation of private education leads to lower per capita income that private education unless initial; income inequality is high. In addition they find that public education not only reduces income inequalities but it also increases the median agents welfare as long as the median agent’s income is below average. Eckstein and Zilcha (1994), in support of the findings by Glomm and Ravikumar (1992), find that compulsory public schooling financed by proportional tax, causes faster growth and also reduces income inequality education.
Zhang (1996) shows that subsidising private education speeds up growth and improves welfare. Because of this, under unanimous voting, societies choose to subsidise private education. Providing public education, on the other hand, may reduce both the growth rate of the average income and the median agent's welfare. Because of this, under majority voting, the median agent also prefers subsidised private education to public education unless initial income inequality is sufficiently high. Thus, the decision to subsidise depends on the nature of the society, whether is characterised by a people who earn high incomes or people who earn less than the average income. Zhang (1996) concludes that the novel implication is that a society may start with public education when initial income inequality is high, and will replace it with subsidised private education in a certain number of periods as income inequality diminishes.
It is therefore, the part of the South African government to determine the income inequality of the country and subsidise in the private and public education depending on the welfare of the people in order to make the subsidies as efficient as possible.
Bibliography
Bishop, J. 1976. “Subsidising Science through Education,” Society Journal, Vol. 13, No. 2, p.34-43.
Duhalde, D., (2007). “Education is a Right – Not a Privilege.” speech at Bowdoin College. Available online at http://theactivist.org/blog/education-is-a-right-not-a-privilege Access 30 August 2009
Dur, R. and Teuling, C. N., 2001. “Education and Efficient Redistribution,” CESifo Working Paper Series No. 592 Available online at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=288946 Access 28 August 2009
Eckstein, Z., and Zilcha, I., 1994., “The effect of compulsory schooling on growth, income distribution and welfare,” Journal of Public Economics, Vol. 54, p.339-59,
Glomm, G., and Ravikumar, B., 1992. ”Public versus private investment in human capital: Endogenous growth and income inequality,” Journal of Political Economy, Vol. 100 No.4, p. 818-34,
Lommerud K. E. (1989), “Educational Subsidies When Relative Income Matters” *Oxford Economic Papers Vol. 41, P.640-652
Schultz, T. P., 2002. “Why Governments Should Invest More to Educate Girls,” World Development Vol. 30, Iss. 2, p.207-225
Sullum, J., 2007. “ Jumping the loan shark: If college is a good investment, why should the government subsidise it?” Availabel online at http://www.reason.com/news/show/117910.html Access 30 August 2009
Zhang, J., 1996. “Optimal Public Investments in Education and Endogenous Growth,” The Scandinavian Journal of Economics, Vol. 98, No. 3 (Sep.,), pp. 387-404
http://www.jstor.org/stable/pdfplus/3440733.pdf
No comments:
Post a Comment