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Education Choice, Endogenous Growth and Income Distribution

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  • Buly A Cardak

    ()
    (School of Economics, La Trobe University)

Abstract

This paper studies the dynamic evolution of an economy in which parents can choose to send their child to a public or private school and vote over taxes used to fund public schools. The objective is to study growth and the evolution of income distribution in a model where alternative education systems coexist. In the model studied, the endogenous distribution of income is bimodal and cannot be fully analytically characterized. Equilibrium is characterized and the dynamics studied analytically. Simulations of the model calibrated to US data are used to complement this analysis. A bimodal income distribution based on education emerges. Public education student converge to a low income equilibrium while private education students experience endogenous growth and have higher incomes. However, public education students also experience long run growth through a spillover from the growth experienced by private education students. the model identifies possible problems with the existence of a private alternative to public education, such as the emergence of an eduction based class structure. However, such an institutional setting can raise incomes and growth relative to a compulsory public education system while still reducing income inequality.

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File URL: http://www.latrobe.edu.au/__data/assets/pdf_file/0007/130885/2002.03.pdf
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Bibliographic Info

Paper provided by School of Economics, La Trobe University in its series Working Papers with number 2002.03.

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Length: 54 pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:trb:wpaper:2002.03

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Web page: http://www.latrobe.edu.au/economics
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Keywords: Education Expenditures and Choice; Voting Equilibria; Endogenous Growth; Income Distribution.;

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References

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  1. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  2. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
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  4. Kaganovich, M & Zilcha, I, 1997. "Education, Social Security and Growth," Papers, Tel Aviv 1-97, Tel Aviv.
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  6. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
  7. Gradstein, Mark & Justman, Moshe, 1997. " Democratic Choice of an Education System: Implications for Growth and Income Distribution," Journal of Economic Growth, Springer, vol. 2(2), pages 169-83, July.
  8. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
  9. Zvi Eckstein & Itzhak Zilcha, 1991. "The Effects of Compulsory Schooling on Growth, Income Distribution and Welfare," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 20, Boston University, Institute for Economic Development.
  10. Buly A. Cardak, 2004. "Education choice, neoclassical growth, and class structure," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 643-666, October.
  11. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," CEPR Discussion Papers 1350, C.E.P.R. Discussion Papers.
  12. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(1), pages 135-64, February.
  13. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  14. 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.
  15. 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, University of Chicago Press, vol. 100(4), pages 818-34, August.
  16. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
  17. Hoyt, William H. & Lee, Kangoh, 1998. "Educational vouchers, welfare effects, and voting," Journal of Public Economics, Elsevier, vol. 69(2), pages 211-228, June.
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Citations

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Cited by:
  1. Wei-Bin Zhang, 2013. "A Synthesis Of The Uzawa-Lucas Model With The Walrasian-General-Equilibrium And Neoclassical-Growth Theories," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(199), pages 7-38, October -.
  2. Cardak, Buly A., 2005. "Education Vouchers, Growth, And Income Inequality," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 9(01), pages 98-121, February.
  3. Tetsuo Ono, 2013. "Public Education and Social Security: A Political Economy Approach," Discussion Papers in Economics and Business 13-06-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Sep 2013.
  4. K C Neanidis & D Varvarigos, 2005. "The Impact of Foreign Aid on Economic Growth: Volatility of Disbursements and Distribution of Receipts," Centre for Growth and Business Cycle Research Discussion Paper Series 56, Economics, The Univeristy of Manchester.
  5. Buly A. Cardak, 2004. "Education choice, neoclassical growth, and class structure," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 643-666, October.
  6. Kyriakos C. Neanidis & Dimitrios Varvarigos, 2005. "The Impact of Foreign Aid on Economic Growth: Volatility of Disbursements and Distribution of Receipts," The School of Economics Discussion Paper Series, Economics, The University of Manchester 0533, Economics, The University of Manchester.
  7. Chen, Hung-ju, 2005. "Educational systems, growth and income distribution: a quantitative study," Journal of Development Economics, Elsevier, vol. 76(2), pages 325-353, April.
  8. Nikos Benos, 2005. "Education Systems, Growth and Welfare," University of Cyprus Working Papers in Economics 5-2005, University of Cyprus Department of Economics.
  9. Wei-Bin Zhang, 2013. "Income and Wealth Distribution with Physical and Human Capital Accumulation: Extending the Uzawa-Lucas Model to a Heterogeneous Households Economy," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 50(2), pages 257-287, November.
  10. Tetsuo Ono, 2012. "Inequality Dynamics and the Politics of Redistribution," Discussion Papers in Economics and Business 12-09-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Nov 2013.
  11. Tetsuo Ono, 2013. "Public Education and Social Security: A Political Economy Approach," Discussion Papers in Economics and Business 13-06, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  12. repec:ebl:ecbull:v:9:y:2008:i:4:p:1-8 is not listed on IDEAS
  13. Tetsuo Ono, 2013. "Public Education and Social Security: A Political Economy Approach," Discussion Papers in Economics and Business 13-06-Rev.2, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Sep 2014.

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