A CROSS-SECTION ANALYSIS OF THE RELATIONSHIP BETWEEN OUTPUT COMPOSITION AND COMPOSITION OF EDUCATION EXPENDITURE

University essay from Lunds universitet/Ekonomisk-historiska institutionen

Abstract: In this thesis, a new theoretical framework is developed to study the relationship between human capital and economic development in a different perspective. The aim of this thesis is to examine the relationship between output composition and composition of education expenditure. Output composition is represented by the share of high value added sectors in total value added and composition of education expenditure is represented by share of higher education expenditure in total education expenditure. In this context, two hypotheses based on the possible positive relationship between the share of high value added production and share of tertiary education are established and the relationship examined for 20 OECD countries from 1995 to 2005 through cross section regression analyses. In contrast with our expectations we reject the existence of a possible positive relationship and our results suggest that the relationship between output composition and composition of education expenditure is negative and mainly depends on the structure of labor market and composition of population.

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