IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Social security, public education and the growth-inequality relationship

  • Glomm, Gerhard
  • Kaganovich, Michael

We study how the relationship between economic growth and inequality depends upon the levels of funding of two of the largest government programs, public education and social security. We do this in the context of an overlapping generations economy with heterogeneous agents where the government collects a tax on labor income to finance these programs. We show that in our model an increase in government spending on social security reduces income inequality and can have a non-monotonic effect on growth. When the initial level of social security funding is low, as is the case in most poor economies, then its increase will enhance growth. When its funding level is high as is typical for developed countries, we show that its further increase can slow down growth while reducing income inequality. These results obtain regardless of whether the increase in social security funding is financed by a tax increase or by cutting the public education budget. We also find that the effects of increasing the level of public education expenditures or the overall size of the government budget (holding the budget composition fixed) are characterized by similar non-monotonic growth-inequality relationships.

If 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.

File URL: http://www.sciencedirect.com/science/article/B6V64-4R3C0C6-1/2/23a6d5cf63eef3aca89fc71bbdcda6a4
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 52 (2008)
Issue (Month): 6 (August)
Pages: 1009-1034

as
in new window

Handle: RePEc:eee:eecrev:v:52:y:2008:i:6:p:1009-1034
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

References listed on IDEAS
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.:

as in new window
  1. Gerhard Glomm & Michael Kaganovich, 2003. "Distributional Effects of Public Education in an Economy with Public Pensions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 917-937, 08.
  2. Partridge, Mark D, 1997. "Is Inequality Harmful for Growth? Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1019-32, December.
  3. Pecchenino, R.A., 1994. "Social Security, Social Welfare and the Aging Population," Papers 9403, Michigan State - Econometrics and Economic Theory.
  4. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  5. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," GE, Growth, Math methods 0410005, EconWPA.
  6. Benabou, R., 1999. "Tax and Education Policy in a Heterogeneous Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?," Working Papers 99-12, C.V. Starr Center for Applied Economics, New York University.
  7. Hubbard, R Glenn & Judd, Kenneth L, 1987. "Social Security and Individual Welfare: Precautionary Saving, Borrowing Constraints, and the Payroll Tax," American Economic Review, American Economic Association, vol. 77(4), pages 630-46, September.
  8. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  9. Gary S. Becker & Nigel Tomes, . "Human Capital and the Rise and Fall of Families," University of Chicago - Population Research Center 84-10, Chicago - Population Research Center.
  10. Banerjee, Abhijit V & Duflo, Esther, 2003. " Inequality and Growth: What Can the Data Say?," Journal of Economic Growth, Springer, vol. 8(3), pages 267-99, September.
  11. Saint-Paul, Gilles & Verdier, Thierry, 1992. "Education, Democracy and Growth," CEPR Discussion Papers 613, C.E.P.R. Discussion Papers.
  12. James Heckman, 2011. "Policies to foster human capital," Educational Studies, Higher School of Economics, issue 3, pages 73-137.
  13. Eckstein, Z. & Zilcha, I., 1991. "The Effects of Compulsury Schooling on Growth Income Distribution and Welfare," Papers 38-91, Tel Aviv.
  14. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  15. Garcia-Penalosa, Cecilia & Aghion, Philippe & Caroli, Eve, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Economics Papers from University Paris Dauphine 123456789/10091, Paris Dauphine University.
  16. Junsen Zhang & Junxi Zhang, 1998. "Social Security, Intergenerational Transfers, and Endogenous Growth," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1225-1241, November.
  17. Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers.
  18. Oded Galor, 2004. "From Stagnation to Growth: Unified Growth Theory," GE, Growth, Math methods 0409003, EconWPA.
  19. Bearse, P. & Glomm, G. & Janeba, E., 2000. "Why poor countries rely mostly on redistribution in-kind," Journal of Public Economics, Elsevier, vol. 75(3), pages 463-481, March.
  20. Günther Rehme, 2002. "(Re-)Distribution of Personal Incomes, Education and Economic Performance Across Countries," CESifo Working Paper Series 711, CESifo Group Munich.
  21. Karni, Edi & Zilcha, Itzhak, 1989. "Aggregate and distributional effects of fair social security," Journal of Public Economics, Elsevier, vol. 40(1), pages 37-56, October.
  22. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June.
  23. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
  24. Lambrecht, Stephane & Michel, Philippe & Vidal, Jean-Pierre, 2005. "Public pensions and growth," European Economic Review, Elsevier, vol. 49(5), pages 1261-1281, July.
  25. Kaganovich, M & Zilcha, I, 1997. "Education, Social Security and Growth," Papers 1-97, Tel Aviv.
  26. Maoz, Yishay D & Moav, Omer, 1999. "Intergenerational Mobility and the Process of Development," Economic Journal, Royal Economic Society, vol. 109(458), pages 677-97, October.
  27. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
  28. 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.
  29. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
  30. Laitner, John, 1988. "Bequests, Gifts, and Social Security," Review of Economic Studies, Wiley Blackwell, vol. 55(2), pages 275-99, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:52:y:2008:i:6:p:1009-1034. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.