Inequality, redistribution and the allocation of public spending in education. A political-economy approach
AbstractThe incidence of public expenditure in education appears to be skewed in favour of the middle and upper classes. This paper inquires into the determinants of this bias using a political economy approach. We develop a model with two time periods with an election occurring between the two. In the first period, agents differ in their initial wealth. In the second period, differences in wealth are combined with differences in income. In the first period, the incumbent government issues debt to finance public spending in education and decides how to allocate available resources between primary and tertiary education. Both increase aggregate income, but while investment in primary education reduces income inequality, investment in tertiary education increases it. At the beginning of the second period, a two-party electoral competition is held and probabilistic voting decides the winner. By varying the parameters of the linear income tax, the elected policy-maker can redistribute resources between low and high income individuals, while by choosing a debt default rate she can renege on the promise to fully repay public obligations, redistributing resources from bond-holders to tax-payers. We show that the investment in primary education might not be (politically) viable. Intuitively, investment in primary education, by reducing income inequality with respect to wealth inequality, might increase the desired debt default rate of future policy makers, making issuing debt to finance primary education unfeasible.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Molise, Dept. SEGeS in its series Economics & Statistics Discussion Papers with number esdp05024.
Length: 22 pages
Date of creation: 27 May 2005
Date of revision:
policy choices in representative democracies; public investment in education; redistribution; government debt repayment.;
Find related papers by JEL classification:
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-06-05 (All new papers)
- NEP-EDU-2005-06-05 (Education)
- NEP-PBE-2005-06-05 (Public Economics)
- NEP-POL-2005-06-05 (Positive Political Economics)
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.:
- Besley, Timothy & Coate, Stephen, 2008.
"Issue Unbundling via Citizens' Initiatives,"
International Quarterly Journal of Political Science,
now publishers, vol. 3(4), pages 379-397, December.
- Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
- Debora Di Gioacchino & Sergio Ginebri & Laura Sabani, 2004. "Political support for anti-inflationary monetary policy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 187-200.
- Roland Benabou, 1997.
"Inequality and Growth,"
NBER Working Papers
5658, National Bureau of Economic Research, Inc.
- Tim Besley & Stephen Coate, .
""An Economic Model of Representative Democracy'',"
CARESS Working Papres
95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Gianni De Fraja, 2004. "Education and Redistribution," Rivista di Politica Economica, SIPI Spa, vol. 94(3), pages 3-44, May-June.
- Mariacristina deNardi, 2000.
"Wealth Inequality and Intergenerational Links,"
Econometric Society World Congress 2000 Contributed Papers
0547, Econometric Society.
- Mariacristina De Nardi, 2004. "Wealth Inequality and Intergenerational Links," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 743-768.
- Mariacristina Nardi, 2004. "Wealth Inequality and Intergenerational Links," Review of Economic Studies, Wiley Blackwell, vol. 71, pages 743-768, 07.
- Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
- repec:ebl:ecbull:v:5:y:2008:i:9:p:1-8 is not listed on IDEAS
- Radhika Lahiri & Elisabetta Magnani, 2008. "On inequality and the allocation of public spending," Economics Bulletin, AccessEcon, vol. 5(9), pages 1-8.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Lupi).
If references are entirely missing, you can add them using this form.