Altruistic parents, who differ in income, make financial transfers to their children, who differ in ability. The children invest in post-compulsory education, subject to an endogenous credit constraint, and taking policy as given. There are two policy tools: a subsidy to those who participate in education and a proportional income tax. Not all children participate; a larger subsidy encourages participation, and a larger income tax discourages it. The parents, prior to making transfers, vote on policy. A voting equilibrium, if it exists, is such that voters in the two tails of the income distribution support a reduction, while the “middle-class” supports an expansion, of the education subsidy. Public support of education is a policy with regressive elements as it entails, among other things, a redistribution from the poor to the middle-earners. We characterise a local equilibrium analytically, verify its existence numerically, and finally perform a number of comparative statics exercises.
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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number
CESifo Working Paper No. 2304.
Length: Date of creation: 2008 Date of revision: Handle: RePEc:ces:ceswps:_2304
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Find related papers by JEL classification: H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education I28 - Health, Education, and Welfare - - Education - - - Government Policy
References listed on IDEAS 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.:
James Heckman & Pedro Carneiro, 2003.
"Human Capital Policy,"
NBER Working Papers
9495, National Bureau of Economic Research, Inc.
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