Moshe Justman

Education, Social Cohesion, and Economic Growth

Analysis of the contribution of education to growth through its role in promoting a common culture indicates that when different cultural groups separately determine the social content of their school curricula excessive polarization can result, with less than optimal growth. The optimal trajectory involves a gradual, reciprocal convergence of school curricula towards the middle ground. This may be difficult to implement in a political context in which all agents are identified with one group or another. When curricula are determined by legislative bargaining, centralization of schooling may result in overly rapid homogenization in some cases, and - perhaps surprisingly - excessive polarization in others.

Human capital, social capital, and public schooling

Abstract Public education contributes to growth not only by building human capital but also by instilling common norms that increase social cohesion. This is modeled in the context of a political economy framework in which social cohesion reduces wasteful rent seeking, and thus strengthens incentives for investment in human captial. The political decisions that determine whether different social groups retain separate schooling systems, or adopt an integrated system, weigh these material advantages against the psychic cost to parents of alienating their children from traditional values. This aspect of public education helps explain why, commonly, education is publicly administered as well as publicly financed.

Technological Infrastructure Policy (TIP): Creating Capabilities and Building Markets

Accelerated technological development and the globalization of trade and investment have changed the nature of competition in world markets, increasing the importance of technological capabilities as a source of competitive advantage. These changes have raised new needs and new opportunities for collective action in support of individual firms’ efforts to acquire the necessary capabilities. We refer to the public goods that are the object of such collective efforts as technological infrastructure,and to the policies aimed at promoting their creation or emergence as technological infrastructure policy.

Implications of the mobility of skilled labor for local public funding of higher education

Inter-jurisdictional labor mobility reduces the incentive for local public funding of education. This can be rectified by dividing the financial burden between the federal and local level, subsidizing local expenditures by inter-jurisdictional payments based on net migration flows

Democratic Choice of an Education System: Implications for Growth and Income Distribution

We use an OLG model to examine democratic choice betweentwo modes of government support for education: subsidies forprivately purchased education and free uniform public provision.We find little conflict between democracy and growth: the samefactors that generate popular support for subsidization overfree uniform provision—large external benefits, a largeexcess burden, and little inequality—also favor its relativegrowth performance. Furthermore, restricting the franchise toan upper-income elite may also reduce growth. Two extensionsexamine the effect of intergenerational mobility and indicatethe theoretical possibility of periodic swings in the balancebetween public and private spending.

A structuralist perspective on the role of technology in economic growth and development

Abstract This paper presents an integrated view of what is termed a “structuralist” perspective to economic growth and development that stands in contrast to the mainstream orthodox or neoclassical view. In the structuralist view, structural changes are causes of growth rather than outcomes of a process of capital accumulation and of rising per capita incomes. Moreover, the growth process may be punctuated by periods of discrete shifts in resource allocation (“creative destruction”) and growth acceleration rather than being smooth throughout. Structural changes need not be automatic, they require a skill-specific infrastructure of new capabilities which, when established, generate new comparative advantages. Market failures may be pervasive due to problems of human capital accumulation, critical mass and discrete choice among alternative growth paths. Thus in addition to creating a favorable environment for business and assuring, through macroeconomic policy, adequate investment, successful growth may require an adequate industrial and technological policy, particularly at nodes of structural change. The paper surveys the structuralist insights appearing in the literature, starting with the early postwar economic development literature and including recently developed formal models. It also proposes a kinked or scalloped aggregate production function as a simple tool for structuralist analysis.

Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile

If higher education is publicly funded by local (sub-federal) jurisdictions, while skilled labor is heterogeneous in responding to wage differentials between jurisdictions, the spillovers that result give rise to a disparity between the centralized output-maximizing allocation of resources to higher education and decentralized equilibria. Generally, decentralization leads to under-provision, which can be offset by inter-jurisdictional subsidies based on gross migration flows. But the extent of the discrepancy depends on the local balance of political forces. Indeed, when the welfare of native-born emigrants is highly valued while new immigrants carry little political weight, over-provision in equilibrium is possible.

The political economy of school choice: linking theory and evidence

Abstract We derive an improved methodology for linking theoretical parameters of a political economy model of school choice to empirical values estimated by regressing local private enrollment shares on mean income, the median-to-mean ratio, religious and ethnic composition, and other variables. This leads us to reject the commonly maintained assumption that a coalition of “ends against the middle” determines local school funding, and to conclude instead that the median-income voter is decisive. It also allows us to estimate the perceived relative efficiency advantage of private schooling, which we find to be about 30% at the margin.

Taking the bite out of fiscal competition

Regions can benefit by offering infrastructure services that are differentiated by quality, thus segmenting the market for industrial location. Regions that compete on infrastructure quality have an incentive to increase the degree of differentiation between them. This places an upper bound on the number of regions successfully able to participate in the location market, and limits the dissipation of regional surplus through Tiebout competition. It indicates a process of fiscal agglomeration, through which regional concentrations arise, which does not depend on the circular causation underlying much of the recent literature on economic geography.

Innovation policy in an open economy: A normative framework for strategic and tactical issues

Abstract In this paper we present a normative analysis of innovation policy grounded in traditional economic principles which responds to the Schumpeterian critique of previous efforts in the neoclassical vein. Focusing directly on specific policy issues we pursue our analysis in two main directions, investigating the role of government in developing an infrastructure for innovation, and the optimal design of support schemes for R&D projects. The analysis suggests that while the structural and developmental issues stressed by the Schumpeterian school are of fundamental importance, identification of disparities between social and private gains, the “market failure” approach, provides an invaluable tool for understanding and formulating innovation policy. Focusing our attention on such factors as economics of scale, the incidence of externalities, and the Supranormal profits offered by imperfectly competitive markets, it provides a rational and realistic basis for anticipating where and how government intervention on behalf of industrial innovation is likely to be most effective. We view our contribution as a step towards bridging the gap between the neoclassical mainstream of economic analysis and the practice of innovation policy.