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Redistribution or Education? The Political Economy of the Social Race

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Author Info
Michele Bernasconi ()
Paola Profeta ()

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Abstract

In an overlapping generations model with two social classes, rich and poor, parents of the different social classes vote on two issues: redistributive policies for them and education investments for their kids. Public education is the engine for growth through its effect on human capital; but it is also the vehicle through which kids born from poor families may exchange their positions with kids born from rich families. This is because education reduces the probability of the mismatch, i.e. individuals with low talent but coming from rich families being placed in jobs which should be reserved to people with high talent (and vice-versa). We find a political economy equilibrium of the voting game using probabilistic voting. When the poor are more politically influent, the economy is characterized by a higher level of education, growth and social mobility than under political regimes supported by the rich; pre-tax inequality is greater in the first case, but post-tax is lower.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1934.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_1934

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Related research
Keywords: social mobility; talents’ mismatch; probabilistic voting;

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Find related papers by JEL classification:
H10 - Public Economics - - Structure and Scope of Government - - - General
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matteo Bassi, 2008. "I Will Survive: Capital Taxation, Voter Turnout and Time Inconsistency," CSEF Working Papers 206, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
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