CDEP Faculty Affiliate Miguel Urquiola has published a paper in the Annual Review of Economics

CDEP Faculty Affiliate Miguel Urquiola has published a paper in the Annual Review of Economics

Monday, January 27, 2020

CDEP Faculty Affiliate Miguel Urquiola has published a paper in the Annual Review of Economics titled "Is Education Consumption or Investment? Implications for School Competition" with W. Bentley MacLeod. Milton Friedman argued that giving parents freedom to choose schools would improve education. His argument was simple and compelling because it extended results from markets for consumer goods to education. The researchers review the evidence, which yields surprisingly mixed results on Friedman’s prediction. A key reason is that households often seem to choose schools based on their absolute achievement rather than their value added. The researchers show that this can be rational in a model based on three ingredients that economists have highlighted since Friedman worked on the issue. First, education is an investment into human capital. Second, labor markets can feature wage premia: Individuals of a given skill level may receive higher wages if they match to more productive firms. Third, distance influences school choice and the placements that schools produce. These factors imply that choice alone is too crude a mechanism to ensure the effective provision of schooling.

Find the paper here.