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Redistribution or Education? The Political Economy of the Social Race

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  • Michele Bernasconi
  • Paola Profeta

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 investment for their children. Public education is the engine for growth through its effect on human capital; but it is also the vehicle through which children born to poor families may exchange their positions with children born to rich families. This is because education reduces the probability of a 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 influential, the economy is characterized by higher levels of education, growth and social mobility than under political regimes supported by the rich; pre-tax inequality is greater in the former case, but post-tax is lower.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1934.

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

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

References

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Cited by:
  1. Arawatari, Ryo & Ono, Tetsuo, 2013. "Inequality, mobility and redistributive politics," Journal of Economic Theory, Elsevier, Elsevier, vol. 148(1), pages 353-375.
  2. Ouattara, Bazoumana & Amegashie, J. Atsu & Strobl, Eric, 2009. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 24, Verein für Socialpolitik, Research Committee Development Economics.
  3. Ichino, Andrea & Karabarbounis, Loukas & Moretti, Enrico, 2010. "The political economy of intergenerational income mobility," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7710, C.E.P.R. Discussion Papers.
  4. Matteo Bassi, 2008. "I Will Survive: Capital Taxation, Voter Turnout and Time Inconsistency," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 206, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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