Human Capital Investments in a Democracy

Abstract

A public and a private investment in human capital, plus intrinsic skills, contribute to each household's human capital.

The public investment is decided by the winner of a democratic election between two office-motivated candidates. We show that households with too low or too high human capital are less likely to vote for the candidate that supports the larger public investment, as opposed to households with moderate human capital.

Moreover, the property of single-peaked preferences is violated.

Despite the absence of well-behaved preferences, we identify sufficient conditions for the existence, uniqueness and efficiency of an equilibrium public investment in human capital.

Keywords: human capital, democracy, differentiated candidates

JEL Classification: D72, H52