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Title: The Political Economy of Early and College Education - Can Voting Bend the Great Gatsby Curve?

Citation Type: Miscellaneous

Publication Year: 2013

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Abstract: High earnings inequality goes hand in hand with low intergenerational earnings mobility across developed countries. I study this relationship in a dynastic overlapping generations model, in which a parent can invest in the early education of his child and decides whether to send the child to college. Countries vary in terms of tertiary education characteristics, in particular the college premium. An increase in the college premium translates into increased incentives to invest in early education because of assumed dynamic complementarities between early and tertiary education. It also increases the earnings gap between college and non-college attendants, which results in larger differences in parents ability to finance education. Public education could mitigate the relationship between inequality and intergenerational mobility. However, public expenditure on education is negatively correlated with inequality. I replicate this cross-country relationship by endogenizing education policies via probabilistic voting, while accounting for biases in voter turnout towards the educated. The model is calibrated to the US as the benchmark economy, which exhibits high inequality and low mobility. Experiments comparing the US to other OECD countries demonstrate that tertiary education characteristics can account for two-thirds of the differences in inequality. Patterns of voter turnout across countries explain nearly one-quarter of the differences in inequality and mobility. A counterfactual exercise for the US suggests that compulsory voting could foster intergenerational mobility, whereas the effect on pretax inequality is comparably low.

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Authors: Rauh, Christopher

Publisher: Universitat Autnoma de Barcelona

Data Collections: IPUMS USA

Topics: Education

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