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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.

Suggested Citation

  • Buly A Cardak, 2002. "Education Choice, Endogenous Growth and Income Distribution," Working Papers 2002.03, School of Economics, La Trobe University.
  • Handle: RePEc:trb:wpaper:2002.03
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    Keywords

    Education Expenditures and Choice; Voting Equilibria; Endogenous Growth; Income Distribution.;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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