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The political economy of public spending on education, inequality, and growth, Volume 1
 
Author:Gradstein, Mark ; Country:World;
Date Stored:2003/12/05Document Date:2003/11/01
Document Type:Policy Research Working PaperSubTopics:Environmental Economics & Policies; Governance Indicators; Achieving Shared Growth; Economic Theory & Research; Poverty Assessment; Health Monitoring & Evaluation; Inequality; Public Health Promotion; Decentralization
Language:EnglishRegion:The World Region
Report Number:WPS3162Collection Title:Policy, Research working paper series ; no. WPS 3162
Volume No:1  

Summary: 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. The author 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.

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