Public Education Expenditures, Growth and Income Inequality

63 Pages Posted: 7 Apr 2016 Last revised: 8 Feb 2023

See all articles by Lionel Artige

Lionel Artige

University of Liège

Laurent Cavenaile

University of Toronto at Scarborough; University of Toronto - Rotman School of Management

Date Written: October 11, 2022

Abstract

This paper analyzes the relationship between public education spending, long-run growth and income inequality. We propose an endogenous growth model with occupational choice and an endogenous supply of teachers and education quality. We show that endogenous school quality alters the shape of those relationships in a way that has new policy implications. First, growth depends on the level of public education expenditures and on the shape of the human capital distribution. Second, the relationship between public education and inequality can be either positive or negative. Calibrating our model to US state data, we find that a significant share of states faces a trade-off between increasing growth and decreasing inequality through public education spending. We find that this trade-off is overall more likely in states with higher public education expenditures, teacher employment share and relative wage, and intergenerational mobility. Finally, the existence of such a trade-off depends on how public education spending is financed.

Keywords: Endogenous growth, human capital, inequality, occupational choice, public education expenditures

JEL Classification: E24, I24, I25, O41, O47

Suggested Citation

Artige, Lionel and Cavenaile, Laurent, Public Education Expenditures, Growth and Income Inequality (October 11, 2022). Available at SSRN: https://ssrn.com/abstract=2759093 or http://dx.doi.org/10.2139/ssrn.2759093

Lionel Artige

University of Liège ( email )

B-4000 Liege
Belgium

Laurent Cavenaile (Contact Author)

University of Toronto at Scarborough ( email )

1265 Military Trail
Scarborough, Ontario M1C 1A4
Canada

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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