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Public Education, Occupational Choice, and the Growth-Inequality Relationship


  • Lloyd-Ellis, Huw


This article develops a dynamic general equilibrium model in which the occupational structure of the economy drives a wedge between the social and private returns to schooling for some workers. I study the impacts of alternative allocations of public resources between basic and higher levels of education on enrollments, income distribution, and growth. In particular, I illustrate how the growth-inequality relationship depends on the tension between two forces: (1) the "trickle-down" effects of expenditures on higher education and (2) the positive impacts on secondary enrollments generated by high-quality basic education and reduced parental inequality. Copyright 2000 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Lloyd-Ellis, Huw, 2000. "Public Education, Occupational Choice, and the Growth-Inequality Relationship," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 171-201, February.
  • Handle: RePEc:ier:iecrev:v:41:y:2000:i:1:p:171-201

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    References listed on IDEAS

    1. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
    2. Huw Lloyd-Ellis & Dan Bernhardt, 2000. "Enterprise, Inequality and Economic Development," Review of Economic Studies, Oxford University Press, vol. 67(1), pages 147-168.
    3. 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.
    4. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    5. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    6. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    7. Birdsall, Nancy & Ross, David & Sabot, Richard, 1995. "Inequality and Growth Reconsidered: Lessons from East Asia," World Bank Economic Review, World Bank Group, vol. 9(3), pages 477-508, September.
    8. 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 818-834, August.
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    Cited by:

    1. van der Weide, Roy & Milanovic, Branko, 2014. "Inequality is bad for growth of the poor (but not for that of the rich)," Policy Research Working Paper Series 6963, The World Bank.
    2. Arcalean, Calin & Schiopu, Ioana, 2010. "Public versus private investment and growth in a hierarchical education system," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 604-622, April.
    3. Takashi Kamihigashi & John Stachurski, 2011. "Existence, Stability and Computation of Stationary Distributions: An Extension of the Hopenhayn-Prescott Theorem," Discussion Paper Series DP2011-32, Research Institute for Economics & Business Administration, Kobe University.
    4. Dwayne Benjamin & Loren Brandt & John Giles, 2006. "Inequality and Growth in Rural China: Does Higher Inequality Impede Growth?," Working Papers tecipa-237, University of Toronto, Department of Economics.
    5. Concetta Mendolicchio & Dimitri Paolini & Tito Pietra, 2014. "Income Taxes, Subsidies to Education, and Investments in Human Capital," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 24-47, February.
    6. Romero J. Gabriel, 2012. "Determining Public Provision of Education Services in a Sequential Education Process," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-42, December.
    7. John Fender & Ping Wang, 2003. "Educational Policy in a Credit Constrained Economy with Skill Heterogeneity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 939-964, August.
    8. Jiang, Neville & Wang, Ping & Wu, Haibin, 2010. "Ability-heterogeneity, entrepreneurship, and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 522-541, March.
    9. Zhang, Lei, 2008. "Political economy of income distribution dynamics," Journal of Development Economics, Elsevier, vol. 87(1), pages 119-139, August.
    10. Ranjan, Priya, 2001. "Dynamic evolution of income distribution and credit-constrained human capital investment in open economies," Journal of International Economics, Elsevier, vol. 55(2), pages 329-358, December.
    11. Momota, Akira, 2009. "A population-macroeconomic growth model for currently developing countries," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 431-453, February.
    12. Marisa Hidalgo-Hidalgo & Iñigo Iturbe-Ormaetxe, 2012. "Should we transfer resources from college to basic education?," Journal of Economics, Springer, vol. 105(1), pages 1-27, January.
    13. Marisa Hidalgo-Hidalgo & Iñigo Iturbe-Ormaetxe, 2008. "Should we raise public expenditure on basic education and reduce expenditure at college?," Working Papers 08.11, Universidad Pablo de Olavide, Department of Economics.
    14. Sano, Koichiro & Tomoda, Yasunobu, 2010. "Optimal public education policy in a two sector model," Economic Modelling, Elsevier, vol. 27(5), pages 991-995, September.

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