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This paper reviews the recent literature on the effects of immigration on the public education of the host country, emphasizing the political economy implications. In particular, we are interested on what happens to enrollment in public schools and the quality of education in these schools. Our review of the literature, which includes both quantitative and empirical studies, suggests the following conclusions. First, immigration has triggered native flight toward private schools in a wide variety of contexts. Some studies also find that the households that switch to private schools tend to be those with higher socio-economic status. Secondly, because of these changes in school choices, one consequence of large-scale immigration is that it appears to undermine the political support for public education, resulting in a deterioration in the funding and quality of public schools that seems to affect negatively the educational outcomes of disadvantaged native students. We offer some suggestions for policies that might help mitigate the negative consequences of immigration outlined above so that host countries can maximize the overall economic benefits of immigration.

Abstract This paper re‐examines how differences in systems for financing education influence GDP by highlighting a neglected function of education policy: it affects the magnitude of gains from job assignment. When more productive jobs demand more skill, privately financed education can increase productivity gains from matching between jobs and skill by increasing the availability of highly educated people. This differs from the standard argument that publicly financed education increases the total amount of human capital by equalizing educational opportunities. It is shown that if job opportunities have large variations in productivity, education policy may face a serious efficiency–equity trade‐off.

The School Operational Assistance Program, referred to as BOS, is a demand intervention program indirectly provided by the government of Indonesia to students through schools, started in July 2005. This paper examines the impact of BOS on educational investment by households and other expenditure such as food and non-food consumption. Using the observations of 1,161 households with at least one member studying in public school from the fourth wave of the Indonesian Family Life Survey (IFLS 4), we discover that BOS is effective in relaxing household's budget constraint, thus increasing educational investment by households. We also discover that households with low income benefit significantly from BOS relative to those with high income. Additionally, we discover that BOS assists households, regardless of their income level, in increasing their spending on food and non-food items.