Welfare and income effects of tuition subsidies and public investment in schooling

Alok Kumar

Economic Modelling, 2025, vol. 144, issue C

Abstract: Evidence demonstrates that poorer individuals have lower human capital attainment than richer individuals. This study constructs and estimates a two-sector dynamic stochastic general equilibrium model with human capital to analyse the welfare and income effects of different types of public schooling expenditure in India. The results show that tuition subsidies that are targeted towards the poor have a significantly positive effect on households’ income and welfare. Although the rich suffer welfare loss, aggregate welfare rises. Public schooling investment and untargeted tuition subsidies have a significantly positive effect on poor households’ income and welfare; however, the effect is smaller relative to tuition subsidies targeted at the poor. Public schooling investment has a larger impact on poor households’ human capital and income.

Keywords: Public schooling investment; Tuition subsidies; Expenditure multipliers; Welfare; Poor households; India (search for similar items in EconPapers)
JEL-codes: C51 C61 E32 E62 H52 O11 O17 O23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:144:y:2025:i:c:s0264999324003584

DOI: 10.1016/j.econmod.2024.107001

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