Chapter 6 Demand for education

The human capital revolution of the 1960s and 1970s turned the previously peripheral topic of demand for education into a major area of research for labor economists. Analysis has focused on a variety of questions relating to the role of education in an economy, individual decision-making with respect to demand for education, and social provision of education. The chapter examines the theoretical and empirical findings from the past two decades of work on these related issues. The chapter discusses the considerable progress made along the paths developed in the late 1950s and early 1960s, as discussed by several economic analysis of demand for education. It is the proposition that economic analysis of rational behavior under specified market and informational conditions goes a long way to understanding the interplay between education and the economy. The evidence on which this conclusion is based, and the specific findings on the social, individual, market, and public finance questions of concern, are presented in the chapter. One of the fundamental issues that motivate economic analysis of education is the extent to which education contributes to national output and, in the context of economic growth, the extent to which increased educational attainment contributes to long-run increases in productivity. One of the key elements of the human capital model of demand for education is that education affects earnings.