Human capital accumulation and endogenous public expenditures

In this paper, we present an overlapping-generations model, where individua ls accumulate human capital through formal schooling. We model the role of the public sector in schooling as one of collecting taxes from households a nd providing inputs to the learning technology. Public expenditures on scho ols are determined endogenously. Under plausible restrictions, our model's predictions qualitatively match the observations on schooling, public expen ditures on education, and student-teacher ratios.