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Educational System, Altruism and Inequality in the Distribution of Income

Ana Moro-Egido ()

No E2004/46, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: This paper studies the impact of public provision of education on the distribution of income in a framework where parents are altruistic toward children. Any child receives two transfers, one as a non-human transfer and the other as a human capital transfer. Under different education regimes, non-human transfers offset the low realization of innate ability, which despite the human capital transfer implies a low level of earnings. Then the questions that will arise are, first, to what extent skill-compensating investments are important as ex-ante income inequality reduction mechanisms in the private provision system, and secondly, how public education can affect this reduction mechanism. I show that tax policy may have unexpected effects on the compensatory effect, that is, on the income gap. The result is that the distribution of income induced by the public provision system is not more equally distributed. Moreover, the fraction of population that does not improve is just at the bottom of the income distribution. I also explore some possibilities to avoid this negative effect and preserve public education as an essential public service.

Keywords: Altruism; human capital and non-human capital transfers; systems of education; inequality (search for similar items in EconPapers)
JEL-codes: D13 D31 E2 I2 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2004
New Economics Papers: this item is included in nep-edu and nep-lab
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