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Economics of Education

Economics of education is the study of education using methods from the field of economics. Among the main research themes internationally are the impact of state financial support for students on higher education outcomes and cost-benefit analysis of public and private investment in education. Most economists distinguish between macroeconomics and microeconomics, with institutional economics as an occasional intermediate category. Macroeconomics is the study of the aggregate level of the economy, both nationally and internationally. Microeconomics is the study of individual and collective decision-making. Institutional economics studies the role of institutions in shaping economic performance in society.

Despite roots extending as far back as the 18th century, the real breakthrough for the economics of education as a field of study and research was in the 1960s with the development of the concept of human capital. Increasingly, education came to be seen as a factor of production in line with labour and physical capital, and economists began to construct models that regarded education as a key driver of economic growth. Moreover, there was a growing interest among scholars in individual decision-making in terms of choosing between different levels of education. In recent decades, the concepts, theories and models of economics have increasingly been used in governmental and intergovernmental analysis of education, thereby necessitating a better understanding of economics among educational scholars.

Since its emergence as an independent field of study and research, educational science has primarily been linked to traditional disciplines within the humanities, such as philosophy. More recently, however, economic methods and approaches have increasingly been applied in education science studies, particularly in the form of econometric methods. Within the research unit, economics of education are primarily studied from an institutional and public administration perspective: How are the systems for allocating state funding to educational institutions constructed and what are the implicit incentives for actors? What are the priorities at the institutional level when deciding where available funds should be spent? To what extent do public reforms have an impact on public sector educational spending?

In the research programme Policy Futures, we develop, evolve and apply economic theory to different strands of research within the economics of education. We produce provide knowledge on the ways the economy impinges on decision-making processes in educational administration. Our work is informed by political economy and institutional economics.