Occupational choice: Teacher quality versus teacher quantity

This article examines the relationship between skill-biased technological changes and the decline in both teacher quality and pupil-teacher ratio-called the "quality-quantity trade-off'-in the United States and other advanced economies during the past several decades. The study presents a theory of educational production that emphasizes teachers' occupational choices. A key assumption is that talented agents have a comparative advantage in learning. The model endogenously generates a teachers sector with intermediate abilities between two types of skilled workers with tertiary education: highly skilled workers and vocational workers. This unique feature helps specify which technological changes may lead to quality-quantity trade-offs. In particular, a crucial element is that the ratio of incomes and thus the income inequality rises within the skilled sector. In this case, the most talented teachers depart from the teachers sector to join the highly skilled sector, and as such, teacher quality declines. In other cases, both teacher quality and teacher quantity may increase. The results are consistent with the observed patterns of technology, educational attainment, educational expenditure, and wage inequality in advanced economies. Finally, another potential cause for the quality-quantity trade-off is a reduction in teacher certification requirement unless the reduction is implemented exclusively on high-ability workers. (c) 2012 Elsevier B.V. All rights reserved.