Distributional effects of educational improvements: Are we using the wrong model?

François Bourguignon, F. Halsey Rogers

Research output: Contribution to journalArticlepeer-review

Abstract

Measuring the incidence of public spending in education requires an intergenerational framework distinguishing between what current and future generations-that is, parents and children-give and receive. In standard distributional incidence analysis, households are assumed to receive a benefit equal to what is spent on their children enrolled in the public schooling system and, implicitly, to pay a fee proportional to their income. We show that, in an intergenerational framework, this is equivalent to assuming perfectly altruistic individuals, in the sense of the dynastic model, and perfect capital markets. But in practice, credit markets are imperfect and poor households cannot borrow against the future income of their children. We show that under such circumstances, standard distributional incidence analysis may greatly over-estimate the progressivity of public spending in education: educational improvements that are progressive in the long-run steady state may actually be regressive for the current generation of poor adults. This is especially true where service delivery in education is highly inefficient-as it is in poor districts of many developing countries-so that the educational benefits received are relatively low in comparison with the cost of public spending. Our results have implications for both policy measures and analytical approaches.

Original languageEnglish (US)
Pages (from-to)735-746
Number of pages12
JournalEconomics of Education Review
Volume26
Issue number6
DOIs
StatePublished - Dec 2007

Keywords

  • Economic development
  • Economic impact
  • Educational finance
  • Expenditures
  • Human capital
  • Incidence of public spending

ASJC Scopus subject areas

  • Education
  • Economics and Econometrics

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