Document Type

Restricted

Advisor

Joana Avritzer

Publication Date

2025

Comments

Access to this paper is restricted to the Connecticut College campus.

Abstract

Mainstream theory addresses education primarily as a supply-side 'human-capital' augmenter, while post-Keynesian and Kaleckian demand-led theory tends to ignore its function altogether. The thesis fills this gap by locating education within a heterodox demand-led growth model. Drawing on Fazzari et al.'s (2020) super-multiplier model, it enters education in two forms: (i) as a specified labour-productivity growth driver—added into the productivity equation through a new education elasticity term—and (ii) as a semi-autonomous aggregate-demand component, since public (and much private) education spending adjusts to medium- and longer-run policy commitments, rather than short-run fluctuations in income. The specification permits education both to act as a demand-stabilizer, helping to offset fluctuations, as well as a supply-accelerator, generating a cumulative-cause virtuous circle of growth.

These mechanisms are exemplified by this thesis by following 1990-2020 trends for Brazil and Finland. There exists descriptive evidence that years of persistent or increasing education expenditures are accompanied by higher labour-productivity improvements and robust growth in output, while education fiscal retrenchment is linked to a period of stagnation. A fixed-effects panel regression strategy is set out to test the model formally, but complete econometric implementation awaits further work.

The analysis argues that education expenditure needs to be considered as macro-policy strategy: a boost during downturns can shore up demand, while persistent expenditure lifts the productivity horizon that contains inflationary pressure. Constraints—such as simplified spending schemes, lag structures, and cross-country differences—are noted, and suggestions are made on further empirical research directions. Broadly, the thesis places education in a position of being a “dual engine” of demand-led growth, both reconciling human-capital and Keynesian traditions, as well as providing new advice on fiscal strategy directed towards inclusive, sustainable development.

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The views expressed in this paper are solely those of the author.