Two Essays In Economics Of Education And Political Economy PDF Download

How economic agents can make sense from imperfect information is a central challenge in economic theory. In this thesis, I first explore how voters try to infer the quality of their government based not only on the information they personally receive but also on observations of their home and foreign governments' policies. Can voters learn from such information and thus any improved accountability reduce "political pandering"? Secondly, I study two models of education where the incentives of both students and firms are profoundly affected by the imperfect informativeness of education certificates and study how increases in enrolment and tuition fees affect educational and job market outcomes. The first chapter, Pandering Across Borders, studies when voters can use information from foreign countries to reduce domestic political pandering, and when pandering is contagious between countries. The voters condition their electoral decisions not only on policies chosen in their home countries, but also on those implemented abroad. Since the policy decisions are driven by re-election concerns, both sources of information may be biased. As a result, informational linkages between the countries give rise to pandering externalities which lead to ambiguous welfare effects of access to international news. The model also shows that institutional harmonisation via internal synchronisation of election dates increases the parameter range in which pandering may occur. Beliefs, Access Constraints and Voluntary Education Decisions, the second chapter of this thesis, contributes to the debate on the negative consequences of high growth rates in university enrollment with a focus on CEE countries. I propose a theory how low education supply elasticities in the short run can lead to self-fulfilling equilibria in a setting in which signalling is reduced to an effortless binary certification technology. When the agents believe that the certification precision is low they enrol at a higher rate and, due to those inelasticities, their beliefs fulfil. The opposite holds when the agents have high beliefs on the quality. The selection among these equilibria depends on students' initial beliefs about the quality of the certification technology. The final chapter, Tuition Fees in a Signalling Model of Education, analyses the trade-off between tuition fees and educational effort. Education serves purely as a signaling device and implies a non-pecuniary cost inversely proportional to students' ability, while tuition fees are independent of ability. In this framework, higher tuition fees can be beneficial for high ability students since they reduce the enrolment rates of the less able agents reducing the effort level necessary to separate. The overall effect of tuition fees is complex and is associated with non-monotonicities in actions of the players in the model.