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On the Political Economy of Education Subsidies
Raquel Fernandez and Richard Rogerson
The Review of Economic Studies
Vol. 62, No. 2 (Apr., 1995), pp. 249-262
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2297804
Page Count: 14
You can always find the topics here!Topics: Tax rates, Majority voting, Higher education, Subsidies, Income inequality, Economics education, Economic efficiency, Income distribution, Excludability
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Standard models of public education provision predict an implicit transfer of resources from higher-income individuals toward lower-income individuals. Many studies have documented that public higher education involves a transfer in the reverse direction. We show that this pattern of redistribution is an equilibrium outcome in a model in which education is only partially publicly provided and individuals vote over the extent to which it is subsidized. We characterize economies in which poorer individuals are effectively excluded from obtaining an education and their tax payments help offset the cost of education obtained by others. We show that increased inequality in the income distribution makes this outcome more likely and that the efficiency implications of this exclusion depend on the wealth of the economy.
The Review of Economic Studies © 1995 The Review of Economic Studies, Ltd.