BAEcon Economics

Education makes up a large share of government spending because of how critical a good education is for individual well-being and a healthy, productive economy  - so getting education policy right is essential.  This is especially true today, as rapid advances in AI and digital technologies are reshaping work, creating uncertainty about which skills will matter most in the future and what a “good” education should deliver. Using economic theory and evidence, this unit equips students with the tools to think rigorously about the ingredients of effective and equitable education policy in a fast-changing world. 

We will consider questions including:

- What skills are important for work, how has this changed over time, how do these skills form and what role does education play?  

 

- What are the benefits of education for individuals and the wider economy?

 

- What are the economic arguments for public funding of education?  

 

- How do people decide how much education to get, why do education choices differ so much between people, should government intervene in these decisions?  

 

- Why do educational inequalities emerge, and how do they shape the passing of advantage and disadvantage across generations?  

 

- What policies are most effective at reducing educational and skill inequalities at different stages of life?  

ECON10072A OR ECON10072B OR ECON20072) AND (ECON20110 OR ECON20222) AND (ECON10232 OR ECON20232 OR ECON10172)

(ECON10072 or ECON20072) and (ECON20110 or ECON20222) and (ECON10232 or ECON20232 or ECON10172)

The course unit aims to:

Introduce students to the key debates on the importance of education and the economic arguments for public policy interventions in education.
Introduce students to major theories and evidence on how skills form and what drives the behaviour of key actors in this process (individuals, parents, teachers etc).
Acquaint students with the key pieces of empirical evidence on how effective different education interventions are.
Improve students’ skills in critical evaluation of the strengths and weaknesses of empirical evidence in education economics.

By the end of the course students are expected to:

1. Be able to demonstrate a good understanding of:

Economic arguments for why education is important.
Key features of workhorse theoretical models of the skill production function.
Overview of evidence on the process of skill formation, as well as determinants of and returns to different investments in different skills.
Rationale for public intervention in education
Commonly used education intervention strategies at different points in the life-course and evidence on their effectiveness

2. Be able to use economic reasoning and awareness of relevant evidence to:

Engage critically with empirical academic research on topics in education economics.
Critically evaluate education policy proposals
Present orally and in writing coherent arguments about education policy questions.

3. Improve a range of practical skills including:

Research, problem solving, analytical, and critical thinking skills
Academic communication skills: writing essays, discussing
Non-academic communication skills – communicating economic concepts to non-academic audiences orally and in writing.

Multidimensionality of skills & demand for skills

Human capital theory and differences in education choices

Mincer earnings equations and their estimation

Using natural experiments to deal with OVB in Mincer regression

Positive Externalities from education

Education & intergenerational income mobility

Heckman's model of skill formation

 

Synchronous activities (such as Lectures or Review and Q&A sessions, and tutorials), and guided self-study. Tutorials will be used to review key points in the lectures, develop technical skills needed to understand the key models and empirical evidence covered in the course, and develop communication skills (oral and written).

Understand how skills are formed and valued in the labour market

Explain how individuals make education decisions and how economists evaluate the private and public benefits of education

Understand the economic rationale for government intervention in education and the main policy approaches used across the life-course

Understand commonly used education intervention strategies at different points in the life-course and evidence on their effectiveness

Use concepts such as human capital theory, returns to education, externalities, and skill formation to analyse education choices and policy problems

Weigh the efficiency and equity implications of different policy options across the life-course (e.g. early childhood, schooling, post-compulsory education), using evidence and economic reasoning

Engage critically with empirical academic research on topics in education economics

Critically evaluate education policy proposals

Present orally and in writing coherent arguments about education policy questions

Research, problem solving, analytical, and critical thinking skills 

40% Written policy brief aimed at policymakers, drawing on evidence from academic research covered in the course, and recorded presentation of the policy brief - (1000 words; presentation: 5 min)

60% Exam (end of term, short and longer answer type questions) - 2h

Formative feedback opportunities:

Class feedback
Office hours
Revision sessions
Discussion boards
Feedback on recorded presentations

Autor, D. H., Levy, F., & Murnane, R. J. (2003). The skill content of recent technological change: An empirical exploration. Quarterly Journal of Economics, 118(4), 1279–1333.

Deming, D. J. (2017). The growing importance of social skills in the labor market. 
Quarterly Journal of Economics, 132(4), 1593–1640.

Becker, G. S. (1964). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. Chicago: University of Chicago Press.

Angrist, J. D., & Krueger, A. B. (1991). Does compulsory school attendance affect schooling and earnings? Quarterly Journal of Economics, 106(4), 979–1014.

Cunha, F., & Heckman, J. J. (2007). The technology of skill formation. American Economic Review, 97(2), 31–47.

Gertler, P., Heckman, J., Pinto, R., Zanolini, A., Vermeersch, C., Walker, S., Chang, S. M., & Grantham-McGregor, S. (2014). Labor market returns to an early childhood stimulation intervention in Jamaica. Science, 344(6187), 998–1001.

Lochner, L., & Moretti, E. (2004). The effect of education on crime: Evidence from prison inmates, arrests, and self-reports. American Economic Review, 94(1), 155–189.

Black, S. E., & Devereux, P. J. (2011). Recent developments in intergenerational mobility. In O. Ashenfelter & D. Card (Eds.), Handbook of Labor Economics, Vol. 4B (pp. 1487–1541). Amsterdam: Elsevier.

Belfield, C. R., Levin, H. M., & Webb, R. C. (Eds.). (2020). The Economics of Education (2nd ed.). Cambridge, MA: Academic Press / Elsevier.

Lovenheim, M. F., & Turner, S. E. (Eds.). (2018). Economics of Education (2nd ed.). 
Abingdon, UK: Routledge. 

No single textbook provides the necessary material for this course. The course itself will be taught using a combination of textbook chapters, elementary journal articles, and working papers. A full reading list with the readings for each topic will be made available at the beginning of the course and through the a Library Reading List .