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Public Education Financing, Earnings Inequality, and Intergenerational Mobility

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  • Christopher Herrington

    (Virginia Commonwealth University)

Abstract

Among developed countries there are large differences in earnings inequality and intergenerational earnings persistence. This paper investigates public education and tax policies as a possible source for these differences. Empirical and quantitative policy experiments focus on the case of the U.S. and Norway. An overlapping generations model is developed and calibrated to match U.S. data. Functions for labor taxes and public education spending are estimated for each country and incorporated into the model. The benchmark exercise finds that taxes and public education spending account for about one-third of differences in earnings inequality and 14 percent of differences in intergenerational earnings persistence between the U.S. and Norway. Furthermore, public intervention in early childhood education more than doubles the impact of these policy changes. (Copyright: Elsevier)

Suggested Citation

  • Christopher Herrington, 2015. "Public Education Financing, Earnings Inequality, and Intergenerational Mobility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 822-842, October.
  • Handle: RePEc:red:issued:14-35
    DOI: 10.1016/j.red.2015.07.006
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    More about this item

    Keywords

    Inequality; Intergenerational mobility; Intergenerational persistence; Public education; Higher education; Labor taxes;
    All these keywords.

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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