Redistribution Through Education and Other Transfer Mechanisms

41 Pages Posted: 10 Nov 2001

See all articles by Eric A. Hanushek

Eric A. Hanushek

Stanford University - Hoover Institution on War, Revolution and Peace; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Charles Ka Yui Leung

The Chinese University of Hong Kong (CUHK) - Department of Economics

Kuzey Yilmaz

Koc University - Department of Economics

Date Written: November 2001

Abstract

Educational subsidies are frequently justified as a method of altering the income distribution. It is thus natural to compare education to other tax-transfer schemes designed to achieve distributional objectives. While equity-efficiency trade-offs are frequently discussed, they are rarely explicitly treated. This paper creates a general equilibrium model of school attendance, labor supply, wage determination, and aggregate production, which is used to compare alternative redistribution devices in terms of both deadweight loss and distributional outcomes. A wage subidy generally dominates tuition subsidies in ex ante (or 'opportunity') calculations, but this reverses in ex post (or 'realized') calculations. Both are generally superior to a negative income tax. With externalities in production, however, there is an unambiguous role for governmental subsidy of education, because it both raises GDP and creates a more equal income distribution.

Suggested Citation

Hanushek, Eric A. and Leung, Ka Yui Charles and Yilmaz, Kuzey, Redistribution Through Education and Other Transfer Mechanisms (November 2001). NBER Working Paper No. w8588. Available at SSRN: https://ssrn.com/abstract=290390

Eric A. Hanushek (Contact Author)

Stanford University - Hoover Institution on War, Revolution and Peace ( email )

Stanford, CA 94305-6010
United States
650-736-0942 (Phone)
650-723-1687 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Ka Yui Charles Leung

The Chinese University of Hong Kong (CUHK) - Department of Economics ( email )

Shatin, N.T.
Hong Kong
+852-2609-7158 (Phone)
+852-2603-5805 (Fax)

HOME PAGE: http://www.cuhk.edu.hk/eco/staff/kyleung

Kuzey Yilmaz

Koc University - Department of Economics ( email )

Rumeli Feneri Yolu
Sariyer 80910, Istanbul
Turkey

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