Redistribution through education and other transfer mechanisms

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

27 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)1719-1750
Journal / PublicationJournal of Monetary Economics
Volume50
Issue number8
Publication statusPublished - Nov 2003
Externally publishedYes

Abstract

Educational subsidies are frequently justified as a method of altering the income distribution. It is thus natural to compare education to other tax-transfer schemes designed to achieve distributional objectives. While equity-efficiency trade-offs are frequently discussed, they are rarely explicitly treated. This paper creates a general equilibrium model of school attendance, labor supply, wage determination, and aggregate production, which is used to compare alternative redistribution devices in terms of both deadweight loss and distributional outcomes. A wage subsidy generally dominates tuition subsidies across a wide range of fundamental parameters for the economy. Both are generally superior to a negative income tax. With externalities in production, however, there is an unambiguous role for governmental subsidy of education, because it both raises GDP and creates a more equal income distribution. © 2003 Elsevier B.V. All rights reserved.

Research Area(s)

  • Endogenous policy, Equity-efficiency tradeoff, Externalities, Redistribution

Citation Format(s)

Redistribution through education and other transfer mechanisms. / Hanushek, Eric A.; Leung, Charles Ka Yui; Yilmaz, Kuzey.

In: Journal of Monetary Economics, Vol. 50, No. 8, 11.2003, p. 1719-1750.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review