Education Vouchers, Growth and Income Inequality

Buly Cardak

No 2001.06, Working Papers from School of Economics, La Trobe University

Abstract: This paper uses a growth model with public and private education alternatives to investigate the implications of education voucher for economic growth and the evolution of income inequality. The results indicate that introducing education vouchers can increase economic growth. families that switch from public to private education due to vouchers experience higher incomes, leading to growth in the tax base which in turn raises public education expenditures and increases the growth of the whole economy. Vouchers have an ambiguous effect on income inequality. Gini coefficients indicate increasing inequality while other measures indicate decreased inequality. Comparing income distributions using generalised Lorenz curves, the distribution under a voucher scheme dominates the distribution without voucher. This implies that in the long run, vouchers offer a welfare improvement. In short run welfare comparisons however, more than half the population is worse off with vouchers, which is consistent with the repeated failures if voucher referenda in the US. The results add a new dimension on which vouchers can be evaluated in the continuing policy debate.

Keywords: Education Choice; Growth; Income Distribution; Public and Private Education; Vouchers EDIRC Provider-Institution: RePEc:edi:smlatau (search for similar items in EconPapers)
JEL-codes: D31 H20 I22 J24 O40 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: EDUCATION VOUCHERS, GROWTH, AND INCOME INEQUALITY (2005)
Working Paper: Education Vouchers, Growth and Income Inequality (2004)
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