* Corresponding author. Tel.: 972-7-6472288; fax: 972-7-6472941. E-mail addresses: grade@bgumail.bgu.ac.il (M. Gradstein), justman@bgumail.bgu.ac.il (M. Justman) European Economic Review 44 (2000) 879}890 The Political Economy of Education Human capital, social capital, and public schooling Mark Gradstein*, Moshe Justman Department of Economics, Ben Gurion University, P.O. Box 653, 84105 Beer Sheva, Israel Abstract Public education contributes to growth not only by building human capital but also by instilling common norms that increase social cohesion. This is modeled in the context of a political economy framework in which social cohesion reduces wasteful rent seeking, and thus strengthens incentives for investment in human captial. The political decisions that determine whether di!erent social groups retain separate schooling systems, or adopt an integrated system, weigh these material advantages against the psychic cost to parents of alienating their children from traditional values. This aspect of public educa- tion helps explain why, commonly, education is publicly administered as well as publicly "nanced.  2000 Elsevier Science B.V. All rights reserved. JEL classixcation: I21; H42; O15; D72 Keywords: Public education; Human capital; Social capital 1. Introduction Although education does not have the technical attributes of a public good } it is both appropriable and divisible } public education, especially at the primary and high school levels (K-12), enjoys wide political support in almost all countries. Several recent e!orts seek to explain this in terms of the instrumental 0014-2921/00/$ - see front matter  2000 Elsevier Science B.V. All rights reserved. PII: S 0 0 1 4 - 2 9 2 1 ( 9 9 ) 0 0 0 4 4 - 6