Why should governments intervene in education, and how effective is education policy

This paper reviews arguments for government interference in the education sector and discusses the effectiveness of commonly used policy instruments. There are both efficiency and equity reasons for government intervention. Particular attention is paid to education spillovers (an efficiency motive). The empirical literature shows that there is little reason to argue for additional policy efforts to correct for externalities. There is some promising evidence, however, for non-pecuniary spillovers in the form of crime reduction and health improvements.With regard to the effectiveness of policy instruments, the paper discusses studies with a (quasi-)experimental design so that the causal impact of the policy can be identified. Early childhood interventions appear to be more effective than interventions in later stages of the education cycle.