Public expenditures, growth and distribution in a mixed regime of education with a status motive

Tsoukis, Christopher

Abstract

This paper tackles the issue of growth, distribution, and the provision of public services in a growth model with human capital accumulation where heterogeneous individuals decide whether to attend a publicly funded education regime or a privately funded one. Heterogeneity of individuals is introduced via their status-motivation which is shown to affect their choice of education. In such a framework, we obtain an inverted-U shaped relationship between growth and the size of the public education sector. In contrast with the general wisdom, we show that a larger public education sector is compatible with both a reduction of inequalities and an increase of long-term growth. Although we demonstrate that in a majoritarian system all individuals agree on a lower size of the public education regime than that which maximizes growth, our analysis also highlights the tension between the direct beneficiaries and nonbeneficiaries from the public regime.

• Acceptance Date: Apr 3, 2013
• Publication Date: Sep 16, 2015
• Journal: Journal of Public Economic Theory
• Print ISSN: 1097-3923
• Publisher: Wiley
• Pages: 673 -701
• DOI: https://doi.org/10.1111/jpet.12099
• Keywords: public services, education, public, private
• Publisher URL: http://dx.doi.org/10.1111/jpet.12099