Human Capital Accumulation and Endogenous Public Expenditures

In this paper, we present an overlapping generations model where individuals accumulate human capital through formal schooling. We model the role of the public sector in schooling as one of collecting taxes from households and providing inputs to the learning technology. Public expenditures on schools are determined endogenously. Under plausible restrictions, our model's predictions qualitatively match the observations on schooling, public expenditures on education, and student-teacher ratios. ¤This paper was written in part while Glomm was visiting at CERGE in Prague, Czech Republic, and while Ravikumar was at the University of Virginia. We would like to thank two anonymous referees for helpful comments; Anne Gulati and Melody Pan for excellent research assistance; and, the Bankard Fund for Political Economy at the University of Virginia for ̄nancial support.