On the political economy of education subsidies

Raquel Fernandez, Richard Rogerson

    Research output: Contribution to journalArticle

    Abstract

    Standard models of public education provision predict an implicit transfer of resources from higher-income individuals toward lower-income individuals. Many studies have documented that public higher education involves a transfer in the reverse direction. We show that this pattern of redistribution is an equilibrium outcome in a model in which education is only partially publicly provided and individuals vote over the extent to which it is subsidized. We characterize economies in which poorer individuals are effectively excluded from obtaining an education and their tax payments help offset the cost of education obtained by others. We show that increased inequality in the income distribution makes this outcome more likely and that the efficiency implications of this exclusion depend on the wealth of the economy.

    Original languageEnglish (US)
    Pages (from-to)249-262
    Number of pages14
    JournalReview of Economic Studies
    Volume62
    Issue number2
    DOIs
    StatePublished - Apr 1995

    ASJC Scopus subject areas

    • Economics and Econometrics

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