## Estimation of Drivers of Public Education Expenditure: Baumol’s Effect Revisited

_IMF Working Papers, July 28, 2015_

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## Bibliographic details
- Authors: Manabu Nose
- Published: July 28, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513517384.001

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### Summary and central finding
- The paper analyzes drivers of rising per-pupil public education spending, including Baumol’s “cost disease” effect.
- Higher wages paid to teachers contributed significantly to the increase in per-pupil spending over the past decades.
- Empirical analyses using a large dataset of advanced and developing economies show that the contribution of Baumol’s effect was much smaller than implied by theory.
- The spending increase reflects rising wage premiums paid for teachers in excess of market wages, especially in middle-income countries.
- The strong wage premium effect suggests that institutional characteristics that govern teachers’ wage setting are key determinants of education expenditure.

### Empirical evidence and scope
- Dataset: large dataset of advanced and developing economies (no additional breakdown provided on the landing page).
- Key empirical conclusion: Baumol’s effect contribution << theoretical implication; wage premiums for teachers explain a larger share of per-pupil spending growth.
- Geographic emphasis noted in keywords: Sub-Saharan Africa is listed among subjects/keywords, and middle-income countries are highlighted in the findings.

### Policy implications and institutional focus
- Institutional characteristics that govern teachers’ wage setting are identified as key determinants of public education expenditure.
- Implication: policies addressing teacher wage-setting institutions and wage-premium formation are central to managing public education spending trends.

### Subject areas and keywords (as listed)
- Subjects: Capital spending, Education, Education spending, Expenditure, Labor, Wages
- Keywords: Baumol’s effect, Capital spending, Education spending, growth assumption, institutions, premium effect, public education, Public education expenditure, Sub-Saharan Africa, teacher-pupil ratio, wage premium, Wages, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/estimation-of-drivers-of-public-education-expenditure-baumols-effect-revisited-43135_