Public education and redistribution when talents are mismatched

In democratic countries, elected policymakers determine public spending. The level of public spending depends on taxes that are decided by a voting mechanism. Policymakers also decide how to allocate funds among different policies, such as public education and pure redistributive transfers. How are...

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Bibliographic Details
Published in:European economic review 2012, Vol.56 (1), p.84-96
Main Authors: Bernasconi, Michele, Profeta, Paola
Format: Article
Language:English
Subjects:
Auswirkung
Begabung
Bildungschance
Bildungspolitik
Economic models
Einkommensverteilung
Government spending
Leistungsgesellschaft
Meritocracy
Mismatch
Mobilitätsbarriere
Political economy
Politische Einstellung
Politische Ökonomie
Public education
Public expenditure
Public schools
Social mobility
Soziale Herkunft
Soziale Klasse
Soziale Mobilität
Studies
Umverteilung
Öffentliche Ausgaben
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Summary:In democratic countries, elected policymakers determine public spending. The level of public spending depends on taxes that are decided by a voting mechanism. Policymakers also decide how to allocate funds among different policies, such as public education and pure redistributive transfers. How are the levels of funding for public education and redistribution determined in the political process? What impacts do votes on these two policies have on inequality, growth and social mobility? We develop a politico-economic model that highlights a novel mechanism: public education provides opportunities for the children of the poor to be recognized for their talent. This reduces the probability of a mismatch, which takes place when individuals with low talent who come from rich families find jobs that should go to people with high talent (and vice versa). Hence, the poor may prefer public spending on education to direct redistribution, while the rich prefer redistribution, as education implies more competition for good jobs from the poor. ► In a political economy model rich and poor vote for public spending on education and redistribution. ► Public education promotes social mobility and is supported by the poor. ► A mismatch of talents arises because of the aversion of the rich for downwards exchange mobility. ► Economic growth and inequality depend on which income class is more politically influential.
ISSN:0014-2921
1873-572X
DOI:10.1016/j.euroecorev.2011.06.001