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ISRN Economics
Volume 2012 (2012), Article ID 909727, 4 pages
http://dx.doi.org/10.5402/2012/909727
Research Article

Optimal Educational Investment: Domestic Equity and International Competition

Department of Economics, Lancaster University Management School, Lancaster University, Lancaster LA1 4YX, UK

Received 6 November 2012; Accepted 25 November 2012

Academic Editors: D. Dave and E. Yeldan

Copyright © 2012 Geraint Johnes. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We construct a family of models to analyse the effect on optimal educational investment of (i) society's preferences for equity and (ii) competition between countries. The models provide insights about the impact of a variety of parameters on optimal policy. In particular, we identify a form of “overeducation” that is new to the literature and provide a counterexample to a common finding in the literature on fiscal federalism.