Human Capital Accumulation and Income Distribution

Raquel Fernandez and Richard Rogerson

No 3994, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The non-existence of credit markets implies that initial income is a determinant of who actually obtains an education. We consider the outcome of a process in which income is taxed to provide subsidies for education, and taxes are chosen by majority voting. We characterize the outcome as a function of both the level and the distribution of income in the economy. In particular we derive conditions under which middle income individuals ally themselves with upper income individuals at the expense of lower income individuals, and vice versa. The analysis determines the relationship between human capital accumulation and distribution of income.

Date: 1992-02
Note: PE ED
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Published as "On the Political Economy of Education Subsidies", Review of Economic Studies, vol. 62, pp. 249-262, April 1995.

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