The IMF Working Papers series is designed to make IMF staff research available to a wide audience. With nearly 300 released each year, working papers cover a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
The impact of public education expenditure on human capital, the supply of different labor skills, and its macroeconomic and distributional consequences is appraised within a multisector CGE model. The model is applied to and calibrated for two Heavily Indebted Poor Countries (HIPCs), Tanzania and Zambia. The simulation results suggest that education expenditure can raise economic growth. However, to maximize benefits from education expenditure, a sufficiently high level of physical investment is needed, as are measures that improve the match between the pattern of educational output and the structure of effective demand for labor. An important result of the simulation experiments is that a well-targeted pattern of education expenditure can be effective for poverty alleviation.