We study how the allocation of government expenditures between two major outlays - education and pay-as-you-go social security - affects human capital distribution in an economy with heterogeneous agents. We consider an overlapping generations economy where the government maintains both...

In most countries, the government is the main provider of education services. Even when a private education sector exists, it is often subsidized. Given the substantial involvement of governments in the education sector and the importance of skill acquisition for individual and national welfare,...