On the role of inequalities and public education expenditures in human capital investment : a theoretical approach
AbstractWe show in this paper that greater inequality in the distribution of wealth implies lower investment in higher education levels and lower aggregate income. Liquidity constraints and indivisibility in human capital investment result in the long-run in multiple equilibria with poverty traps. Although the heterogeneity in individual abilities allows economic mobility is not full : poor individuals with low abilities remain poor forever. The effect of the fiscal redistribution on the level of human capital investment is ambiguous unless for higher levels of income inequality where this effect is positive. Education funding policies however, are shown to be more efficient in enhancing human capital investment and rising interclass and intergenerational economic mobility.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number bla04094.
Length: 20 pages
Date of creation: Nov 2004
Date of revision:
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Wealth inequality; human capital; economic mobility; fiscal redistribution; public education expenditures.;
Find related papers by JEL classification:
- H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
- I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-03-13 (All new papers)
- NEP-DEV-2005-03-13 (Development)
- NEP-PBE-2005-03-13 (Public Economics)
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