Democratic Choice of an Education System: Implications for Growth and Income Distribution

We use an OLG model to examine democratic choice between two modes of government support for education: subsidies for privately purchased education and free uniform public provision. We find little conflict between democracy and growth: the same factors that generate popular support for subsidization over free uniform provision large external benefits, a large excess burden and little inequality - also favor its relative growth performance. Furthermore, restricting the franchise to an upper-income elite may also reduce growth. Two extensions examine the effect of intergenerational mobility and indicate the theoretical possibility of periodic swings in the balance between public and private spending.

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