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Public Education for the Minority,Private Education for the Majority

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  • Gilat Levy

Abstract

Public provision of private goods such as education is usually viewed as a form of redistribution in kind. However, does it arise when income redistribution is feasible as well? In this paper I analyse a two-dimensional model of political decision making. Society has to choose both the tax rate and the allocation of the revenues between income redistribution and public provision of education. The political process that I analyse involves endogenous parties. Parties have a unique role in the model; I assume that parties increase the commitment ability of politicians and, as a result, increase the ability of different groups in society to compromise with one another. I find that public provision of education arises as an anti-majoritarian outcome; public provision of education arises only when those who benefit from education, e.g., voters with children, are a minority. The reason is that when education is consumed only by a minority, such redistribution in kind is 'cheap' relative to universal income redistribution, i.e., it can be effectively provided even with low taxes. Public provision of education arises then as a political compromise offered by the party of the poor who benefit from education and the rich voters who prefer low taxes. Thus, when those who benefit from education are a minority, it is publicly provided. When those who benefit from education are a majority, they have to buy private education, since there is no public provision of this good.

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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number /2004/470.

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Date of creation: Mar 2004
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Handle: RePEc:cep:stitep:/2004/470

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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

Related research

Keywords: Education; redistribution; political parties.;

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References

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  1. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
  2. Barzel, Yoram, 1973. "Private Schools and Public School Finance," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 174-86, Jan.-Feb..
  3. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
  4. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  5. Fernandez, Raquel & Rogerson, Richard, 1995. "On the Political Economy of Education Subsidies," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 249-62, April.
  6. James M. Poterba, 1997. "Demographic structure and the political economy of public education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 48-66.
  7. Gradstein, Mark & Kaganovich, Michael, 2004. "Aging population and education finance," Journal of Public Economics, Elsevier, vol. 88(12), pages 2469-2485, December.
  8. Bearse, P. & Glomm, G. & Jeneba, E., 1999. "Composition of Government Budget, Non-Single Peakedness and Majority Voting," Papers 9903, Michigan State - Econometrics and Economic Theory.
  9. Bearse, P. & Glomm, G. & Janeba, E., 2000. "Why poor countries rely mostly on redistribution in-kind," Journal of Public Economics, Elsevier, vol. 75(3), pages 463-481, March.
  10. Besley, Timothy J. & Coate, Stephen, 2001. "Issue Unbundling via Citizens' initiatives," CEPR Discussion Papers 2857, C.E.P.R. Discussion Papers.
  11. Tim Besley & Stephen Coate, . "An Economic Model of Representative Democracy," Penn CARESS Working Papers ecf70d639d700dba5327ab0c8, Penn Economics Department.
  12. Osborne, Martin J & Slivinski, Al, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 65-96, February.
  13. Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661314, December.
  14. Epple, Dennis & Romano, Richard E, 1996. "Public Provision of Private Goods," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 57-84, February.
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Cited by:
  1. Austen-Smith, David & Wallerstein, Michael, 2006. "Redistribution and affirmative action," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1789-1823, November.

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