Distributional Implications of Public and Private Investment in Human Capital:
A Comparative Analysis.
by
Buly Cardak.
April 1996
Department of Economics. University of Melbourne. Parkville Victoria
3052 Australia
ABSTRACT
The distributional implications of different forms of financing for
investment in human capital are investigated. An overlapping generations
model which incorporates human capital is employed. Two extreme cases are
compared: one where education is privately funded and the other where education
is publicly funded through taxes which are decided by majority vote. The
model is an extension of earlier work by Glomm and Ravikumar (1992) with
a more general CES utility specification. Numerical methods are used to
solve the model as closed form solutions are not available. Many of the
earlier results are found to be robust to this generalisation whereby income
inequality is eliminated in both public and private education systems.
An important exception is when education expenditure is treated as a luxury
good, as it is found that public education systems achieve greater per
capita income than private education systems.
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