Nova workboard

a blog from young economists at Nova SBE

Education is delicate

The equilibrium in education expenditure needs to be achieved with sense and some sensibility, since educational policies have impact on the future of younger generations and countries.

The concept of public goods is central to analyze the role of the government in the resources allocation.

Public goods are defined by two characteristics such as non-excludability – It is not possible to exclude non-payers from consuming the good – and non-rivalry in consumption – additional people consuming the good do not diminish the benefit to others.

In this matter education has two dimensions, one public and another private.

Society benefits when more people get higher levels of education, because they have more probabilities of finding a good job and, consequently, earn more. Once they have higher earnings that will be reflected in taxes and contributions. More education means more knowledge, more innovation, and more productivity of the labor force, which is great for domestic production.

Education boosts productivity and enlarges prospects, being a great equalizer of opportunity when done properly. These consequences reflect the positive externalities that come from education, which contributes to increase the society’s welfare.

Education is a no-rival good because the same professor can teach Mr. A and he can also teach Mr.B. This is the public dimension of education.

Even the countries which have a public education also have private schools. It is possible to exclude non-payers and that’s why education is not a pure public good. However, in consumer theory matters this is good because the consumer has the option to choose accordingly to his preferences and, giving his budget constraint, achieving the highest utility level possible. Thus, education also has a private dimension.

The portuguese economic context is conducting to decreases in public investment in education system. This decrease is already showing some effects, such as tuitions growth as well as the inefficient amount of students per class, lots of students leaving colleges, and the Professor’s unemployment is growing.

Let’s take a look at the numbers.

In 2010, the public expenditure on education as a percentage of GDP was 5,8% in Portugal, below the OECD (6,3%) and EU (5,9%) averages (data from Education at a Glance 2013) .

Even though, in Portugal the expenditure in education has been increasing throughout these last decades, there are still low levels of qualifications in the portuguese population, as we can see in graphs 3 and 4. Therefore, the crisis shall not be allowed to make Portugal regress in this matter.

The numbers here presented reveal that the government has to carefully balance the pros and cons of certain measures in sectors as fundamentals to society as education, which is a necessary condition for the development and growth of any country.



Sara Simões, 643



Author: studentnovasbe

Master student in Nova Sbe

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