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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.

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File URL: http://www.latrobe.edu.au/__data/assets/pdf_file/0010/130879/2001.06.pdf
File Function: First version, 2001.06.pdf
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Bibliographic Info

Paper provided by School of Economics, La Trobe University in its series Working Papers with number 2001.06.

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Length: 57 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:trb:wpaper:2001.06

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Related research

Keywords: Education Choice; Growth; Income Distribution; Public and Private Education; Vouchers;

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References

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  1. Mark Gradstein & Moshe Justman, . "Democratic Choice of an Education System: Implications for Growth and Income Distribution," CARESS Working Papres 97-05, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  2. repec:ltr:wpaper:2002.03 is not listed on IDEAS
  3. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  4. 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.
  5. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
  6. Hoyt, William H. & Lee, Kangoh, 1998. "Educational vouchers, welfare effects, and voting," Journal of Public Economics, Elsevier, vol. 69(2), pages 211-228, June.
  7. Cardak, Buly A., 2005. "Education Vouchers, Growth, And Income Inequality," Macroeconomic Dynamics, Cambridge University Press, vol. 9(01), pages 98-121, February.
  8. Lee A. Lillard, 1975. "Inequality: Earnings vs. Human Wealth," NBER Working Papers 0080, National Bureau of Economic Research, Inc.
  9. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, vol. 90(1), pages 130-146, March.
  10. Bearse, P. & Glomm, G. & Ravikumar, B., 1999. "On the Political Economy of Means-Tested Education Vouchers," Papers 9904, Michigan State - Econometrics and Economic Theory.
  11. Kaganovich, M & Zilcha, I, 1997. "Education, Social Security and Growth," Papers 1-97, Tel Aviv.
  12. Buly A. Cardak, 2004. "Education Choice, Endogenous Growth and Income Distribution," Economica, London School of Economics and Political Science, vol. 71, pages 57-81, 02.
  13. Cecilia Elena Rouse, 1998. "Private School Vouchers And Student Achievement: An Evaluation Of The Milwaukee Parental Choice Program," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 553-602, May.
  14. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," CEPR Discussion Papers 1350, C.E.P.R. Discussion Papers.
  15. Eckstein, Zvi & Zilcha, Itzhak, 1994. "The effects of compulsory schooling on growth, income distribution and welfare," Journal of Public Economics, Elsevier, vol. 54(3), pages 339-359, July.
  16. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  17. West, Edwin G, 1997. "Education Vouchers in Principle and Practice: A Survey," World Bank Research Observer, World Bank Group, vol. 12(1), pages 83-103, February.
  18. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  19. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
  20. Gradstein, Mark & Justman, Moshe, 2000. "Human capital, social capital, and public schooling," European Economic Review, Elsevier, vol. 44(4-6), pages 879-890, May.
  21. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  22. Gerhard Glomm & B. Ravikumar, 1998. "Flat-Rate Taxes, Government Spending on Education, and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 306-325, January.
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Citations

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Cited by:
  1. repec:ltr:wpaper:2001.06 is not listed on IDEAS
  2. Buly A Cardak, 2004. "Education Vouchers, Growth and Income Inequality," Working Papers 2004.03, School of Economics, La Trobe University.
  3. 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..
  4. C. Fan & Jie Zhang, 2013. "Differential fertility and intergenerational mobility under private versus public education," Journal of Population Economics, Springer, vol. 26(3), pages 907-941, July.
  5. Nikos Benos, 2005. "Education Systems, Growth and Welfare," University of Cyprus Working Papers in Economics 5-2005, University of Cyprus Department of Economics.

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