Education choice, neoclassical growth, and class structure

The evolution of income distribution is studied in a dynamic model of education choice where both public and private education are available. Public education is financed using a tax rate determined by majority voting. The analysis focuses on neoclassical growth in order to ensure tractability in identifying a steady state. Possible voting equilibria in the steady state are characterized, with steady state income distribution found to be bimodal. Public education offers higher growth to the poor in the transition to the steady state, however public education students converge to the lower mode of the income distribution. Under some conditions, universal public education offers steady state human capital superior to that available to any student in the mixed education model considered, while universal private education unconditionally offers steady state human capital superior to that of the mixed education model. Copyright 2004, Oxford University Press.