The Political Economy of Public Spending on Education, Inequality, and Growth

16 Pages Posted: 20 Apr 2016

See all articles by Mark Gradstein

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

Date Written: November 2003

Abstract

Public provision of education has often been perceived as universal and egalitarian, but in reality it is not. Political pressure typically results in incidence bias in favor of the rich. Gradstein argues that the bias in political influence resulting from extreme income inequalities is particularly likely to generate an incidence bias, which we call social exclusion. This may then lead to a feedback mechanism whereby inequality in the incidence of public spending on education breeds higher income inequality, thus generating multiple equilibria: with social exclusion and high inequality; and with social inclusion and relatively low inequality. The author also shows that the latter equilibrium leads to higher long-run growth than the former. An extension of the basic model reveals that spillover effects among members of social groups differentiated by race or ethnicity may reinforce the support for social exclusion.

This paper - a product of Public Services, Development Research Group - is part of a larger effort in the group to understand the causes and the consequences of incidence biases in public spending.

Suggested Citation

Gradstein, Mark, The Political Economy of Public Spending on Education, Inequality, and Growth (November 2003). Available at SSRN: https://ssrn.com/abstract=636581

Mark Gradstein (Contact Author)

Ben-Gurion University of the Negev - Department of Economics ( email )

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