The Paradox of Education or the Good Side of Inequality

Cecilia Garcia-Penalosa

Oxford Economic Papers, 1995, vol. 47, issue 2, 265-85

Abstract: In this paper, the author argues that one of the mechanisms through which inequality may affect long-run growth is through individuals' education possibilities. The cost of education is, therefore, a crucial variable. The author endogenizes this cost and shows that it will be high relative to average wealth in poor countries and relatively low in rich countries. With two-tailed distributions of wealth, this is going to imply that greater inequality increases growth rates in poor economies, while it decreases them in rich economies. Copyright 1995 by Royal Economic Society.

Date: 1995
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