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We build a model where homogeneous workers can accumulate human capital by investing in education. Schools combine public resources and individual effort to generate productive skills. If skills are imperfectly compensated, then in equilibrium students may under-invest in effort. We examine the effect on human capital accumulation of three basic education finance policies. Increased tuition subsidies may not be beneficial because they increase enrollment but they may lower the incentives for student achievement, hence the skill level. Policies directed at enhancing the productivity of education or making degrees more informative are more successful at improving educational outcomes.


This is the accepted version of the following article:

Blankenau, W., & Camera, G. (2009). Public Spending on Education and the Incentives for Student Achievement. Economica, 76(303), 505-527.

which has been published in final form at DOI: 10.1111/j.1468-0335.2008.00687.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

Peer Reviewed






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