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Public education expenditures, growth and income inequality

Lionel Artige and Laurent Cavenaile

Journal of Economic Theory, 2023, vol. 209, issue C

Abstract: This paper analyzes the relationship between public education spending, long-run growth and income inequality. We propose an endogenous growth model with occupational choice and an endogenous supply of teachers and education quality. We show that endogenous school quality alters the shape of those relationships in a way that has new policy implications. First, growth depends on the level of public education expenditures and on the shape of the human capital distribution. Second, the relationship between public education and inequality can be either positive or negative. Calibrating our model to US state data, we find that a significant share of states faces a trade-off between increasing growth and decreasing inequality through public education spending. We find that this trade-off is overall more likely in states with higher public education expenditures, teacher employment share and relative wage, and intergenerational mobility. Finally, the existence of such a trade-off depends on how public education spending is financed.

Keywords: Endogenous growth; Human capital; Inequality; Occupational choice; Public education (search for similar items in EconPapers)
JEL-codes: E24 I24 I25 O11 O41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:209:y:2023:i:c:s0022053123000182

DOI: 10.1016/j.jet.2023.105622

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