There were marked shifts in both the share of national expenditure on education in GDP, as well as in its composition, in 1962-98. At the beginning of the period the share of education in GDP soared, remained relatively constant in the 1970s, declined in the 1980s, and began to rise again in the 1990s. This paper analyzes the relations between these shifts and various demographic, economic, and political explanatory variables. We find that demographic variables, such as age group and the proportion of Arab students, as well as economic variables-chief among them the level and distribution of national income-explained a significant part of expenditure on education. We further find that to fully explain the development of public spending on education in Israel, we need to consider some political variables as well, such as the second Rabin government. We also compare the development of public and private expenditure on education, current expenditure and investment, and the composition of expenditure on the various stages of the education system-pre-school, primary, secondary, and higher education.

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