Public 7: Education Flashcards
What is the setup of Spence’s 1973 signalling model?
Workers have private productivity levels. Their productivity is not observable, but they can undertake education which has lower marginal costs for high-types. Education is a pure signal.
After workers choose an education level, firms make wage contracts dependent on e. They are in a competitive market.
Can any separating equilibria exist in a Spencian signalling model?
Yes. Low-types will undertake no education and receive low wages; high-types will undertake any amount of education above the point where low-types would prefer (e=0,w=θ_L). The ‘best’ separating equilibrium (where education is at a minimum) is the only informationally consistent one.
Can any pooling equilibria exist in a Spencian signalling model?
Yes. w = θbar with low levels of education is a stable pooling equilibrium.
What does Stiglitz (1975) argue about signalling?
Signalling improves the matching of workers to jobs when there are multiple dimensions to ability. All workers are made better off by one being able to signal, as they are better matched to a job that is a good fit for them.
What is the human capital theory of education?
Education develops skills and improves productivity, but is costly to undertake. It is therefore a form of ‘capital’ to invest in.
Why are private capital markets unlikely to work well as funding for education?
Human capital cannot be offered as collateral. Therefore, lenders will be unwilling to lend resources for educational investments.
Parents make educational choices on behalf of their children. How does this affect education policy?
- Parents aim to jointly maximise their own consumption and their children’s human capital. They may therefore make choices and tradeoffs that are not in their child’s best interests, such as encouraging them to leave school early to work.
- Parents may be poorly informed about the quality of education their child is receiving, or how well their child is doing at school.
- The limits to altruism and information mean that parents often make suboptimal choices for their children.
Why do some people underinvest in their own human capital?
- Imperfect capital markets and credit constraints mean borrowing is too expensive and education is not affordable.
- Poor/imperfect information about educational opportunities
- Parents making poor choices for their children.
Why does the state monitor and publish the quality of school education?
School quality is otherwise very difficult for parents to observe. Exam results do not tell the full story, and even those are heavily influenced by the intake population rather than the school’s quality. If parents are to make informed choices about schooling - and thus place competitive pressure on schools to improve - they need access to good information about school quality.
Why is primary and secondary education completely free in the UK, despite the private returns students gain from it?
Since primary and secondary education is compulsory, making it ‘free’ and funded through income tax is effectively an income-contingent loan.
Are ‘school choice’ reforms likely to disadvantage poorer students?
It depends how the reforms are organised. If richer parents are more able to capitalise on the gains to choice (eg through better information, or moving closer to the right neighbourhoods), we expect to see stratification. However, if schools are offered pupil premiums for disadvantaged children, places are allocated by lottery, and top-ups are disallowed (as in the Jencks proposal), there is no reason to think poorer students will be disadvantaged. If schools improve (as they should do), they will be helped along with others.
Are ‘school choice’ reforms likely to improve quality in schools?
As long as quality is well-measured, and schools face financial incentives to attract students, it will be. However, if outcomes are all that is measured, schools simply face incentives to ‘cream-skim’ children that are easy to teach (eg already high-achievers, or from wealthy backgrounds).
Should school choice reforms be constrained by requirements such as allocation of places by ballot and the ‘no topping-up’ requirement?
Yes. If schools can compete on price and allocate places however they like, incentives are in place for schools to ‘cream-skim’ the easiest and richest children to teach. This happened in New Zealand after the school reforms of 1989. ‘No topping-up’ and requiring that places be allocated by ballot corrects these incentives.
What was the Education Maintenance Allowance? Was it a good idea?
Parents of students aged 16-18 were paid as long as their children stayed in school. It was scrapped in England in 2010, but remains in place in Scotland, Wales and Northern Ireland.
It had significant effects on participation rates in education, and later attainment rates, for lower socioeconomic groups. However, critics argued that it was wasteful, paying many families to do what they were already doing.
What is Tiebout sorting? What does it suggest about the provision of schooling?
Suppose communities offer club goods that are semi-rival, and compete for residents. Residents are fully mobile and face no mobility costs. Preferences vary, but there are at least as many communities as ‘types’ of residents.
Then, Tiebout shows that residents will ‘vote with their feet’ and sort into communities that provide their preferred level of services, reaching an efficient outcome.
However, it is not an equitable one. Tiebout sorting often leads to segregation by income, and children from poor households will all be clustered in one neighbourhood and be served by one school.
This suggests that schools should be incentivised to improve quality, not just performance.
