Economics of Education

Course content

This course explores why individuals and societies invest in education. Education has many private benefits (earnings, employment, health and longevity, consumption value), as well as social benefits (GDP growth, tax income, positive externalities). Education also affects inequality within a generation and across generations. Throughout this course, current policy issues concerning education will be discussed. Economic models will be connected to data that can be used to test the models' implications, and students will learn how models and data can serve to inform education policy. Applications will address primary and secondary education, university education, and vocational or on-the-job training, and place the Danish and European experience in an international context.


First, we introduce human capital theory to study individual decision-making. It will be used to analyze investments in education and how they are affected by ability, comparative advantage, family background, and macroeconomic conditions. We will encounter the empirical problem of disentangling the return to education from the return to innate ability, and investigate how the association between education and individual earnings has changed over time.


At the societal level, we study the social return to education and the financing of publicly provided schooling. Looking at the production of education, we ask how educational outcomes are produced by schools, whether financial resources improve student achievement, and which school inputs are more or less effective in producing desired educational outcomes (such as PISA test scores). We will consider the potential of early childhood education in the context of skill-formation over the life cycle. We will also reflect on possible conflicts between societal goals - efficiency, equity, and liberty - that influence decisions about the allocation of education resources.


From a macro perspective, education matters for national economic growth as well as for individual mobility. We investigate whether there is a risk of over-education, or whether individuals under-invest in light of a rapidly changing economic reality and international competition. We also study the intergenerational transmission of economic status through parental investments, credit constraints and achievement inequality, and the resulting income distribution.


This course will teach students how to apply economic thinking to education-related questions. In doing so, the class will draw on a wide range of economic principles and apply previously learned material. The variety of models and perspectives will range from macro to micro, including labor economics, macroeconomic growth, and public finance. Students will be equipped with an economic toolbox to evaluate education policy issues methodically, and should eventually be able to use these tools to inform education policy. While the course will be based on theory, it is nevertheless of an empirical nature: recent data will be used to evaluate current issues, and students will learn how to read empirical articles that form the state-of-the art in economics of education.


MSc programme in Economics – elective course

Bacheloruddannelsen i økonomi – valgfag på 3. år

The Danish BSc programme in Economics - elective at the 3rd year


The course is open to:

  • Exchange and Guest students from abroad
  • Credit students from Danish Universities
  • Open University students
Learning outcome

After completing the course the student is expected to be able to:



  • Account for economic models in the education context,
  • Identify determinants of equilibrium/optimality and describe the role they play relative to each other.
  • Recall the frameworks and their assumptions, as well as their economic predictions.
  • Discuss the empirical state-of-the-discipline
  • Read selected articles in economic journals and extract the appropriate conclusions.
  • Examine whether the presented empirical evidence convincingly identifies causal relationships. Later, evidence needs to be recalled to address topics.



  • Identify key questions in a brief non-specific text, presented as a policy issue rather than an economic model and link the key questions to economics of education.
  • Select the theories and pieces of empirical evidence which are relevant for the question or debate.
  • Choose the correct theory or framework that helps them organize an argument around a given education issue (manage the topics).
  • Evaluate the real-life relevance of possible economic explanations or scenarios
  • Assess which explanation or hypothetical outcome is more or less likely. This means they have to navigate the sometimes contradicting models or papers that we have studied and present their trade-offs critically.



  • Apply the learned knowledge and skills to new and complex policy cases.
  • Present economic scientific arguments, orally and in written form, which are based on their reading of theory as well as state-of-the-art empirical findings.
  • Construct concise cases where they show their well-rounded appraisal of a situation that connects economic theory to the real world.
  • Evaluate policy proposals critically and scientifically, and present arguments in favor or against them.


Lectures are not only frontal teaching, but involve discussions between students and the instructor.

Active participation is expected during the lectures, as well as the exercise classes which include peer-feedback on assignments.

With some topics, we will practice the argumentation skills in a panel-discussion, where prepared content is debated and the strengths of different arguments evaluated.

Mandatory individual assignments prepare technical material and practice the exam form (written evaluation of policy-relevant education issues, demonstrating ability to draw on appropriate economic theories).

Main textbook: Checchi, D. (2006) The Economics of Education, Cambridge University Press (all chapters). ISBN: 9780521066464, http:/​/​​10.1017/​CBO9780511492280


In addition to the following examples of journal articles, lecture notes (slides) are considered study material and are part of the syllabus.


Examples of further mandatory reading:

  • Becker, G. S. and N. Tomes (1986). Human Capital and the Rise and Fall of Families. Journal of Labor Economics 4 (3), 1-47.
  • Becker, G. S. (1991) Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. National Bureau of Economic Research, distributed by Columbia University Press. Chapter 4 and its Appendix.
  • Belley, P. and L. J. Lochner (2007). The Changing Role of Family Income and Ability in Determining Educational Achievement. Journal of Human Capital 1 (1), 37-89.
  • Cunha, F. and J. J. Heckman (2007). The Technology of Skill Formation. The American Economic Review: Papers and Proceedings 97 (2), 31-47.
  • Psacharopoulos, G. and H. A. Patrinos (2004). Returns to Investment in Education: A Further Update. Education Economics 12 (2), 111-134.
  • Solon, G. (2002). Cross-Country Differences in Intergenerational Earnings Mobility. The Journal of Economic Perspectives 16 (3), 59-66.
  • Hanushek, E. A. and L. Woessmann (2010). Education and Economic Growth. In D. J. Brewer and P. J. McEwan (Eds.), Economics of Education, Volume 2, pp. 60-67.Amsterdam: Elsevier.
  • Lleras-Muney, A. (2005). The Relationship Between Education and Adult Mortality in the United States. Review of Economic Studies 72 (1), 189-221.
  • Lochner, L. J. and E. Moretti (2004). The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports. The American Economic Review 94 (1), 155-189.

It is strongly recommended to have finished the first year of the Study of Economics at the Department of Economics, Copenhagen University.
It is recommended to have finished the 3rd semester, specially the courses "Probability theory and statistics" and Microeconomics I.
The student will benefit from having taken Econometrics I (at the 4th semester).

The course material has two components: Economic theory as it relates to education, and the application of this theory to real-life issues, using empirical methods.
In the first couple of weeks of the course, therefore, we study human capital theory and students are expected to be able to follow the derivations of these models themselves. This requires knowledge of constrained optimization techniques. They will be practiced in the exercise classes.

Then, building on this foundation, we study empirical papers and discuss the benefits/disadvantages of different approaches to using available data to evaluate questions such as the returns to education. While students will not be working with data themselves in this course, a basis in econometrics is needed to a) understand issues such as causality, and b) interpret the estimation results presented in the scientific papers.

2 hours lectures 1 to 2 times a week from week 6 to 20.
2 hours exercise classes a week from week 6/7 to 20/21.

The overall schema for the BA 3rd year and Master can be seen at KUnet:
MSc in Economics => "courses and teaching" => "Planning and overview" => "Your timetable"
BA i Økonomi/KA i Økonomi => "Kurser og undervisning" => "Planlægning og overblik" => "Dit skema"

Timetable and venue:
To see the time and location of lectures and exercise classes please press the link/links under "Timetable"/​"Se skema" at the right side of this page (F means Spring). The lectures is shown in each link.

Please be aware:
- The study administration allocates the students to the exercise classes according to the principles stated in the KUnet.
- All exercise classes are taught in English and it is expected that the students ask questions in English, so foreign students are included in the dialog.
- The schedule of the lectures and the exercise classes can change without the participants´ acceptance. If this occur, you can see the new schedule in your personal timetable at KUnet, in the app myUCPH and through the links in the right side of this course description and at the link above.
- It is the students´s own responsibility continuously throughout the study to stay informed about their study, their teaching, their schedule, their exams etc. through the curriculum of the study programme, the study pages at KUnet, student messages, the course description, the Digital Exam portal, Absalon, the personal schema at KUnet and myUCPH app etc.



During lectures, students participate in discussions to test their skills at integrating theory and empirics, and evaluating empirical evidence critically. The lecturer will provide ongoing individual and collective feedback during lectures and the panel discussions. The teaching assistants gives the students individual feedback on their mandatory assignments. Additionally, the lecturer gives collective feedback in the mock-exam assignment.

7,5 ECTS
Type of assessment
On-site written exam, 3 hours under invigilation
Type of assessment details
ITX-exam in the exam venues of the university.
The exam assignment is in English and must be answered in English.
Exam registration requirements

There will be 6 Assignments, which are graded 0 (fail), 1 (pass), 2 (outstanding). In order to qualify to participate in the final exam, students need to obtain a total score in their assignments that is at least 85% of the total possible points on the basis of passes. At 6 assignments, students need to pass at least 5 with a grade of "1".


No aids allowed at the written ITX-exam.


Marking scale
7-point grading scale
Censorship form
No external censorship
at the written exam.
The written ITX-exam may be chosen for external assessment by random sample.
An oral re-examination may be with external assessment.
Exam period

Exam information:

The exact time and place will be available in Digital Exam from the middle of the semester. 

More information about examination, rules, aids etc. at Master(UK), Master(DK) and Bachelor(DK).


Reexam is a 20 min. oral exam without preparation time. 

No aids allowed during the examination.

You must still pass 5 out of 6 mandatory assignments for qualifying to the reexam. 


Reexam information:

More information in Digital Exam in August. 

More info: Master(UK), Master(DK) and Bachelor.

Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the course.


In order to obtain the top grade “12”, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.


In order to obtain the passing grade “02”, the student must in a satisfactory way be able to demonstrate a minimal acceptable level of  the knowledge, skills and competencies listed in the learning outcomes.



As a very basic requirement for passing the course, students must demonstrate sufficient understanding of the human capital models, correctly recall their goals, assumptions, and predictions (knowledge of theory), and recall the purpose, econometric approach, and findings of empirical papers we read (knowledge of empirics).

In order to pass, students must also demonstrate the skill of linking their passive knowledge of models and empirical papers to a given (hypothetical) real-world situation. This means they must be able to select the models or papers that are appropriate and relevant to the case at hand, and then evaluate their different predictions or arguments, and for example point to the instances where a model's assumption diverges from a real-life scenario (skill).

In order to receive full credit, students must demonstrate a well-developed competency to construct arguments on complex education issues that utilize the best available resources from economics of education – be they theoretical or empirical.

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 42
  • Class Instruction
  • 28
  • Preparation
  • 133
  • Exam
  • 3
  • English
  • 206


Course number
7,5 ECTS
Programme level
Full Degree Master

1 semester

- Go to 'Signup' for information about registration and enrollment.

Information about admission and tuition fee:  Master and Exchange Programme, credit students and guest students (Open University)

and venue:
- For teaching: Go to 'Remarks'.
- For exam and re-sits: Go to 'Exam'.
Department of Economics, Study Council
Contracting department
  • Department of Economics
Contracting faculty
  • Faculty of Social Sciences
Course Coordinator
  • Jesper Eriksen   (14-716c7a776c79356c7970727a6c75476c6a767535727c356b72)

Lectures: See ‘Course Coordinators’

Teacher of the exercise class:
Ex. Class 1:

Please read "Remarks" regarding the schedule of the teaching.

Saved on the 17-05-2024

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Courseinformation of students