Education spread and economic development : a coordination game approach
Autor(a) principal: | |
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Data de Publicação: | 2023 |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.5/27593 |
Resumo: | Even though education exhibits strong positive externalities, there exists abundant evidence that the positive correlation between the spread of higher education and aggregate productivity tends to gradually disappear as a larger number of students attend college. To rationalize this apparent contradiction, we model college attendance through a coordination (Stag Hunt) game, where a set of youngsters decide whether to enrol in college or immediately enter the labour market. The benefits of higher education are reaped by everyone only if all youngsters decide to engage in higher education. We argue that the reward to college education tends to decline as it becomes widespread on account of two factors. First, the wage premium of skilled labour falls due to an increased supply. Then, new colleges tend to be set up in less dense areas, so that the average distance between a youngster’s residence and the closest university rises. The decrease in the reward of tertiary education is multiplied by its impact on the result of a Stag Hunt game. If such a reward is high, there will likely be a switch from the “risk dominant” Nash equilibrium, where no youngster decides to engage in tertiary education, to the “payoff dominant” equilibrium with unanimous enrolment in college. By contrast when the net reward of higher education becomes relatively low the outcome of the Stag Hunt will be instead a coordination breakdown, which might even lead to a fall in the productivity of the agents involved. The latter result was found in laboratory studies by Straub (1995) and Schmidt et al. (2003) among others and we can explain it in theoretical terms if we allow for incomplete information in the Stag Hunt game. |
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Education spread and economic development : a coordination game approachEducation and Economic DevelopmentCoordination GamesIncomplete Information GamesEven though education exhibits strong positive externalities, there exists abundant evidence that the positive correlation between the spread of higher education and aggregate productivity tends to gradually disappear as a larger number of students attend college. To rationalize this apparent contradiction, we model college attendance through a coordination (Stag Hunt) game, where a set of youngsters decide whether to enrol in college or immediately enter the labour market. The benefits of higher education are reaped by everyone only if all youngsters decide to engage in higher education. We argue that the reward to college education tends to decline as it becomes widespread on account of two factors. First, the wage premium of skilled labour falls due to an increased supply. Then, new colleges tend to be set up in less dense areas, so that the average distance between a youngster’s residence and the closest university rises. The decrease in the reward of tertiary education is multiplied by its impact on the result of a Stag Hunt game. If such a reward is high, there will likely be a switch from the “risk dominant” Nash equilibrium, where no youngster decides to engage in tertiary education, to the “payoff dominant” equilibrium with unanimous enrolment in college. By contrast when the net reward of higher education becomes relatively low the outcome of the Stag Hunt will be instead a coordination breakdown, which might even lead to a fall in the productivity of the agents involved. The latter result was found in laboratory studies by Straub (1995) and Schmidt et al. (2003) among others and we can explain it in theoretical terms if we allow for incomplete information in the Stag Hunt game.ISEG - REM - Research in Economics and MathematicsRepositório da Universidade de LisboaPontes, José Pedro2023-04-06T09:20:05Z2023-042023-04-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/27593engPontes, José Pedro (2023). "Education spread and economic development : a coordination game approach". REM Working paper series, nº 0267/20232184-108Xinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-04-09T01:32:19Zoai:www.repository.utl.pt:10400.5/27593Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T17:49:03.423461Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Education spread and economic development : a coordination game approach |
title |
Education spread and economic development : a coordination game approach |
spellingShingle |
Education spread and economic development : a coordination game approach Pontes, José Pedro Education and Economic Development Coordination Games Incomplete Information Games |
title_short |
Education spread and economic development : a coordination game approach |
title_full |
Education spread and economic development : a coordination game approach |
title_fullStr |
Education spread and economic development : a coordination game approach |
title_full_unstemmed |
Education spread and economic development : a coordination game approach |
title_sort |
Education spread and economic development : a coordination game approach |
author |
Pontes, José Pedro |
author_facet |
Pontes, José Pedro |
author_role |
author |
dc.contributor.none.fl_str_mv |
Repositório da Universidade de Lisboa |
dc.contributor.author.fl_str_mv |
Pontes, José Pedro |
dc.subject.por.fl_str_mv |
Education and Economic Development Coordination Games Incomplete Information Games |
topic |
Education and Economic Development Coordination Games Incomplete Information Games |
description |
Even though education exhibits strong positive externalities, there exists abundant evidence that the positive correlation between the spread of higher education and aggregate productivity tends to gradually disappear as a larger number of students attend college. To rationalize this apparent contradiction, we model college attendance through a coordination (Stag Hunt) game, where a set of youngsters decide whether to enrol in college or immediately enter the labour market. The benefits of higher education are reaped by everyone only if all youngsters decide to engage in higher education. We argue that the reward to college education tends to decline as it becomes widespread on account of two factors. First, the wage premium of skilled labour falls due to an increased supply. Then, new colleges tend to be set up in less dense areas, so that the average distance between a youngster’s residence and the closest university rises. The decrease in the reward of tertiary education is multiplied by its impact on the result of a Stag Hunt game. If such a reward is high, there will likely be a switch from the “risk dominant” Nash equilibrium, where no youngster decides to engage in tertiary education, to the “payoff dominant” equilibrium with unanimous enrolment in college. By contrast when the net reward of higher education becomes relatively low the outcome of the Stag Hunt will be instead a coordination breakdown, which might even lead to a fall in the productivity of the agents involved. The latter result was found in laboratory studies by Straub (1995) and Schmidt et al. (2003) among others and we can explain it in theoretical terms if we allow for incomplete information in the Stag Hunt game. |
publishDate |
2023 |
dc.date.none.fl_str_mv |
2023-04-06T09:20:05Z 2023-04 2023-04-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.5/27593 |
url |
http://hdl.handle.net/10400.5/27593 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Pontes, José Pedro (2023). "Education spread and economic development : a coordination game approach". REM Working paper series, nº 0267/2023 2184-108X |
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info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
ISEG - REM - Research in Economics and Mathematics |
publisher.none.fl_str_mv |
ISEG - REM - Research in Economics and Mathematics |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799131572091224064 |