Optimizing Public Expenditure Allocations between Secondary and Higher Education

With a view to define a balance in the allocation of public expenditure across secondary education and higher education, we compare, in this paper, the relative contributions of public expenditures on secondary and higher education to growth as well as equity, employing a computable general equilibrium (CGE) model of India. Our policy simulations show that reducing allocations for secondary education and correspondingly increasing allocations of public education expenditure for higher education, produce monotonically decreasing growth and equity outcomes, if expansion of higher education does not foster technological progress. On the other hand, if higher education is well integrated with technological innovation, the former can become a powerful engine of inclusive growth. However, the growth and equity outcomes are not monotonically increasing with respect to expenditures on higher education when the latter is closely linked with technological innovation. Further, when higher education is a facilitator of technological innovation, the optimal allocation proportion for higher education in public educational spending is most likely to be within the range 40%-50%. Length: 38 pages