The Optimal Subsidies to Higher Education, with Reference to Education and Research

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  • Optimal Subsidies to Higher Education with Reference to Education and Research

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We consider a society which consists of two sectors, the educational sector and the production sector. We define the educational sector as one that produces two outputs jointly, higher education forming human capital and research increasing the stock of social knowledge. Social knowledge determines the level of technology in the production of consumption goods. Our purposes are to clarify the nature of higher education and to analyze efficient resource allocation in a two−sector economy, considering the external effects of education and research activities in the context of an endogenous growth model.

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