Public schooling, college subsidies and growth

How does the mix of public education expenditures across primary and secondary (K-12) education and post-secondary (college) education influence economic growth? To address this, I build an overlapping generations endogenous growth model. Human capital is accumulated through compulsory K-12 education and through optional college education. Government uses tax revenue to provide quality in K-12 schooling and to subsidize college tuition. When total expenditures are small, all funds should provide K-12 quality. When expenditures are above a critical value, a positive share should subsidize tuition. The share should increase with total expenditures and with the degree of complementarity of human capital accumulated through the two types of education. Also, increased education spending is more likely to increase growth when a larger share subsidizes tuition. (C) 2004 Elsevier B.V. All rights reserved.