Testing of the Existence of Baumol Cost Disease in Public Education Expenditures in Iran

Document Type : Research Article

Authors

1 Associate Professor, Department of Public Sector Economics, Faculty of Management, University of Tehran, Tehran, Iran

2 Associate Professor, Department of Economics, Institute of Humanities and Cultural Studies, Tehran, Iran (IHCS).

3 M.A. in Economics, Department of Economics, Institute of Humanities and Cultural Studies, Tehran, Iran (IHCS).

Abstract

This paper analyzes the incentives to increase the cost of public education, including the effect of the "cost sickness" scheme. According to the theory, the salary paid to teachers can explain the significant increase in tuition costs. Bamol divides the economy into two leading non-progressive parts. The leading sector includes the part of economic activities in which technology is crystallized as innovations and the accumulation of capital in it by activating economies of scale provides the basis for increasing per capita production. In this sector, the increase in wages is proportional to the increase in productivity. On the other hand, there are activities in which the human role is prominent and productivity growth occurs only occasionally and accidentally. In terms of education, they are located in the non-leading sector. In non-leading industries, the wage rate increases in proportion to the higher wage rate in the leading sector to retain workers despite the low productivity growth similar to the effect (Samuelson-Balasa) and increases the unit cost of services in the non-leading sector. This increase in cost translates into an additional increase in the cost of education, and because the demand for education is unbearable, it continues to increase the general cost of education. The present study reviews the article on unbalanced macroeconomic growth and crisis in urban areas of Bamol and examines the increase in costs in the Iranian education sector using the Bamol model and ARDL method during the period (1360-1397). Long-term and short-term results show that not only is there no sick disease, but also an increase in wages to productivity reduces production costs in that sector and can lead to prosperity in this sector.

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References

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Journal of Applied Economics Studies in Iran
Volume 11, Issue 41
March 2022
Pages 203-231

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