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Education Vouchers, Growth and Income Inequality

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  • Buly A Cardak

    (School of Economics, La Trobe University)

Abstract

This paper uses a growth model with public and private education alternatives to investigate the implications of education voucher for economic growth and the evolution of income inequality. The results indicate that introducing education vouchers can increase economic growth. families that switch from public to private education due to vouchers experience higher incomes, leading to growth in the tax base which in turn raises public education expenditures and increases the growth of the whole economy. Vouchers have an ambiguous effect on income inequality. Gini coefficients indicate increasing inequality while other measures indicate decreased inequality. Comparing income distributions using generalised Lorenz curves, the distribution under a voucher scheme dominates the distribution without voucher. This implies that in the long run, vouchers offer a welfare improvement. In short run welfare comparisons however, more than half the population is worse off with vouchers, which is consistent with the repeated failures if voucher referenda in the US. The results add a new dimension on which vouchers can be evaluated in the continuing policy debate.

Suggested Citation

  • Buly A Cardak, 2001. "Education Vouchers, Growth and Income Inequality," Working Papers 2001.06, School of Economics, La Trobe University.
  • Handle: RePEc:trb:wpaper:2001.06
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    References listed on IDEAS

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    1. Cardak, Buly A., 2005. "Education Vouchers, Growth, And Income Inequality," Macroeconomic Dynamics, Cambridge University Press, vol. 9(1), pages 98-121, February.
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    15. Buly A. Cardak, 2004. "Education Choice, Endogenous Growth and Income Distribution," Economica, London School of Economics and Political Science, vol. 71, pages 57-81, February.
    16. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    17. Cohen-Zada, Danny & Justman, Moshe, 2003. "The political economy of school choice: linking theory and evidence," Journal of Urban Economics, Elsevier, vol. 54(2), pages 277-308, September.
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    Cited by:

    1. Cardak, Buly A., 2005. "Education Vouchers, Growth, And Income Inequality," Macroeconomic Dynamics, Cambridge University Press, vol. 9(1), pages 98-121, February.
    2. Christian Ferreda & Matías Tapia, 2010. "Redistributive Taxation, Incentives, and the Intertemporal Evolution of Human Capital," Documentos de Trabajo 390, Instituto de Economia. Pontificia Universidad Católica de Chile..
    3. C. Fan & Jie Zhang, 2013. "Differential fertility and intergenerational mobility under private versus public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 907-941, July.
    4. Nikos Benos, 2005. "Education Systems, Growth and Welfare," University of Cyprus Working Papers in Economics 5-2005, University of Cyprus Department of Economics.
    5. Salwa Trabelsi, 2017. "Mixed, Private And Public Educational Financing Regimes, Economic Growth And Income Inequality," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 62(212), pages 43-62, January -.

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    More about this item

    Keywords

    Education Choice; Growth; Income Distribution; Public and Private Education; Vouchers;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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