Education, Income Distribution, and Growth: The Local Connection
AbstractThis paper develops a simple model of human capital accumulation and community formation by heterogeneous families, which provides an integrated framework for analysing the local determinants of inequality and growth. Five main conclusions emerge. First, minor differences in education technologies, preferences, or wealth, can lead to a high degree of stratification. Imperfect capital markets are not necessary, but will compound these other sources. Second, stratification makes inequality in education and income more persistent across generations. Whether the same is true of inequality in total wealth depends on the ability of the rich to appropriate the rents created by their secession. Third, the polarization of urban areas resulting from individual residential decisions can be quite inefficient, both from the point of view of aggregate growth and in the Pareto sense, especially in the long run. Fourth, when state-wide equalization of school expenditures is insufficient to reduce stratification, it may improve educational achievement in poor communities much less than it lowers it in richer communities; thus average academic performance and income growth both fall. Yet it may still be possible for education policy to improve both equity and efficiency. Fifth, because of the cumulative nature of the stratification process, it is likely to be much harder to reverse once it has run its course than to arrest at an early stage.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 995.
Date of creation: Jul 1994
Date of revision:
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Other versions of this item:
- Benabou, R., 1994. "Education, Income Distribution, and Growth: The Local Connection," Working papers 94-16, Massachusetts Institute of Technology (MIT), Department of Economics.
- Roland Benabou, 1994. "Education, Income Distribution and Growth: The Local Connection," NBER Working Papers 4798, National Bureau of Economic Research, Inc.
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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