A Model of Public Education and Income Inequality with a Subsistence Constraint
This paper constructs a model in which incomes do not necessarily converge under a public education system. School attendance creates an opportunity cost of foregone income that poorer agents might need. These poorer agents, unlike high-income agents, allocate less time to schooling and so are less able to increase their human capital. However, some agents in a poverty trap might actually have higher income, at least temporarily, than do agents who do not fall into this trap. The model also shows why better public education systems can lead to more income inequality and why a gradual allocation of resources to public education may prove more beneficial than a sudden, large shift of resources.
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Volume (Year): 69 (2002)
Issue (Month): 1 (July)
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- 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.
- Jimenez, Emmanuel, 1986. "The Public Subsidization of Education and Health in Developing Countries: A Review of Equity and Efficiency," World Bank Research Observer, World Bank Group, vol. 1(1), pages 111-29, January.
- Sylwester, Kevin, 2002. "Can education expenditures reduce income inequality?," Economics of Education Review, Elsevier, vol. 21(1), pages 43-52, February.
- Galor, Oded & Zeira, Joseph, 1993.
"Income Distribution and Macroeconomics,"
Review of Economic Studies,
Wiley Blackwell, vol. 60(1), pages 35-52, January.
- Perotti, Roberto, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 755-76, October.
- Raquel Fernandez & Richard Rogerson, 1994.
"On the political economy of education subsidies,"
185, Federal Reserve Bank of Minneapolis.
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