chapter  19
40 Pages

Optimal Local Education Policies

This chapter reviews the effects of human capital investment on the economic growth of a community and a region. It describes the production function for education, and based on economists model. Education is the economic engine needed for innovation and new technology. Endogenous growth studies no longer aggregate all workers into a "generic labor," but rather classify them by skill level. To better understand the role of peers, one needs data on specific friendships within classrooms as well as attributes of these friends and their families' socioeconomic status. The chapter analyzes suggestions for creating an educated labor force. High quality preschool programs for disadvantaged children produce substantial gains in terms of school readiness. Such preschool programs also have the advantage to give mothers the time necessary to possibly invest in their own education or employment. The chapter investigates a community's willingness to pay for education, as well as appropriate financing alternatives for local education policies.