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Education, Distributive Justice, and Adverse Selection

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  • M. Fleurbaey
  • R. J. Gary-Bobo
  • D. Maguain
Abstract
We consider a model of education planning in an economy in which agents differ in their costs of acquiring education. The agents' cost parameter, called "talent," is not observed. The Principal is endowed with a fixed sum of money, with which two types of transfer can be made: in cash and in kind. The Principal can finance transfers in kind, called "help," by means of schooling expenditures, which reduce the agent's education cost. The Principal seeks to maximize a social welfare function which is a CES index of utility levels. We study the optimal allocation of individual education effort, schooling expenditures (help), and cash, under self-selection and budget constraints. Assuming first that the set of types is finite, and that help and effort are sufficiently substitutable, we find that individual education investment levels are an increasing function, and help is a decreasing function of talent. Utility levels cannot be equalized because of self-selection constraints. More aversion for inequality unequivocally leads to more inequality of educational achievements, and to more assistance through redistribution. This remains true in the limit, under strictly egalitarian preferences of the Principal. The same qualitative properties hold in the general case of a continuum of types. Bunching at the lower end of the talent scale is a feature of the solution for sufficiently high degrees of inequality aversion.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • M. Fleurbaey & R. J. Gary-Bobo & D. Maguain, 2000. "Education, Distributive Justice, and Adverse Selection," THEMA Working Papers 2000-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2000-14
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    References listed on IDEAS

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    Cited by:

    1. Fábio D. Waltenberg, 2010. "Essential educational achievements as the currency of educational justice," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, June.
    2. Robert J. Gary-Bobo & Alain Trannoy, 2015. "Optimal student loans and graduate tax under moral hazard and adverse selection," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 546-576, September.
    3. Kaname Miyagishima, 2016. "Education Inequality among Different Social Groups," Hacienda Pública Española / Review of Public Economics, IEF, vol. 217(2), pages 11-35, June.
    4. Huai-Te Huang & Hao-En Chueh, 2023. "Sustained Improvement of Educational Information Asymmetry: Intentions to Use School Social Media," Sustainability, MDPI, vol. 15(3), pages 1-15, February.
    5. Eric Stephens, 2012. "Teach a man to fish? Education vs. optimal taxation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1700-1727, November.
    6. Kuhn, Michael & Siciliani, Luigi, 2007. "Performance Indicators for Quality with Adverse Selection, Gaming and Inequality Aversion," CEPR Discussion Papers 6261, C.E.P.R. Discussion Papers.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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