Impact of Ethnic Fragmentation on Education Expenditure

This paper examines the relationship between Education spending and diversity by analysing the impact of Ethnic Fractionalisation on Public and Private education expenditure using empirical approaches for panel data. Private education spending is included to observe whether it changes due to diversity as an alternate indicator for changes in citizens' social preferences due to Ethnic Fragmentation. We observe that variables based on macroeconomic stipulations do not coincide between Public and Private education spending. We find that a 1 standard deviation rise in ethnic fractionalisation significantly increases public education spending by 0.241%, whereas the change in private education spending is insignificant, whereas the prior is inconsistent with research evidence. Countries with high inequality are found to be insensitive to changes in diversity, in assessment the converse is true; countries with low inequality tend to have increased public education spending. These findings are subject to omitted variable bias and hence require alterations. Further extensions imply there is no significant change in public education spending, and private education spending increases by 2.114% due to a 1 unit increase in ethnic fractionalisation. These findings are consistent with the literature and hence leave room for further research. The sections below go through the Economic Theory utilised in our empirical research, then the literature is reviewed to survey previous papers and findings regarding our topic. The 3rd and 4th sections discuss the econometric theory and empirical analysis of results respectively