Question

What is the rationale for subsidizing higher education in LDCS? Do you think that it is a legitimate rationale from an economic point of view? Explain in detail

Answer 1

Introduction:-

Education has served a great purpose in elevating countries from extreme poverty and from problems which have led to widespread issues and lack of overall access to resources such as nutrition, healthcare and modern development.

Most countries which are economically backward or LDCS (Least Developed Countries) have one common problem that their manpower is not skilled enough to get any modern day jobs in an ever growing rapidly transforming world, where sky is the limit for someone who wants to earn money and has the requisites respectively.

Over the years, countries such as India, China, Nepal, Bangladesh etc. have rapidly been able to develop education hubs across major cities, to allow for easier manpower development and have thus benefitted and have been able to increase their overall growth rates.

Case Specifics:-

What is the rationale for subsidizing higher education in LDCS? Do you think that it is a legitimate rationale from an economic point of view? Explain in detail

Now, that we know, that education increases the capability of one to be employed and also their technical competencies and overall mental makeup, we can analyze why governments in Least developed countries would want to spend on subsidizing higher education, and the economic concepts behind the same.

Any country requires to make progress over a period of time, to increase the overall standards of living of people so that it can become a better place to live in.

Education allows for higher employment standards which economically speaking will bring in more capital into the country which then would allow for people and the government both to earn more over a period of time.

Also, the net result of subsidizing an activity should be checked in terms of the revenue it can generate. Imparting specialized knowledge to people allows them to have the required skills to work in corporate environments or otherwise be able to generate more revenue. This revenue allows for higher economic activity and the government earns higher taxes than it usually would while increasing the overall standards of living.

Therefore, the rationale behind subsidizing the higher education is that it provides higher opportunities for employment to the citizens of the country and economically means that the government would be able to bring in more capital from other countries as well as earn more revenue from taxes. Thus the spending would act like an investment which will give long term gains to the nation and have an overall increase in economic activity and labor productivity respectively.

The rise in taxes further can also be used for other infrastructural developments which the society may require.

Please feel free to ask your doubts in the comments section.