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Public education and redistribution when talents are mismatched

Author

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  • Bernasconi, Michele
  • Profeta, Paola
Abstract
In democratic countries, elected policymakers determine public spending. The level of public spending depends on taxes that are decided by a voting mechanism. Policymakers also decide how to allocate funds among different policies, such as public education and pure redistributive transfers. How are the levels of funding for public education and redistribution determined in the political process? What impacts do votes on these two policies have on inequality, growth and social mobility? We develop a politico-economic model that highlights a novel mechanism: public education provides opportunities for the children of the poor to be recognized for their talent. This reduces the probability of a mismatch, which takes place when individuals with low talent who come from rich families find jobs that should go to people with high talent (and vice versa). Hence, the poor may prefer public spending on education to direct redistribution, while the rich prefer redistribution, as education implies more competition for good jobs from the poor.

Suggested Citation

  • Bernasconi, Michele & Profeta, Paola, 2012. "Public education and redistribution when talents are mismatched," European Economic Review, Elsevier, vol. 56(1), pages 84-96.
    • Handle: RePEc:eee:eecrev:v:56:y:2012:i:1:p:84-96
    DOI: 10.1016/j.euroecorev.2011.06.001
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    More about this item

    Keywords

    Political economy; Social mobility; Meritocracy;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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