نابرابری درآمد، هزینه های آموزش و پرورش، و رشد

Recent studies have reported a negative association between income inequality and economic growth. If true, what accounts for this finding? What are possible transition mechanisms that might link the two? This paper explores one such mechanism. Income inequality raises expenditures for public education as a fraction of gross domestic product (GDP). Although public education expenditures are positively associated with future economic growth, the contemporaneous effect upon growth is negative. Given this cost upon current growth, these findings may help to explain the lack of a large, positive effect from the growth of human capital upon economic growth as reported in the literature.

How and why is the distribution of income related to economic growth?1 Economists have primarily examined the first part of the question and some have found that the relation is negative. Alesina and Rodrik (1994) and Persson and Tabellini (1994) report that greater income inequality lowers subsequent growth after one controls for initial gross domestic product (GDP) per capita and initial human capital. Clarke (1995) shows that this finding is robust to changing the measure of income inequality and under many different model specifications.2 But why does this relation hold? Attempts to answer this question include those which come from Alesina and Perotti (1993) who report that greater income inequality lowers growth by inducing political instability and Perotti (1994) who concludes that this relation is not due to greater income inequality raising government transfers, thereby lowering growth. Sylwester (1997) explores some other candidate transmission mechanisms but does not report any positive findings.3 A better understanding of how income inequality affects growth might shed light upon which policies could mitigate any negative effects of income inequality upon growth and show how various policies could indirectly affect this relation. Since few countries have been able to achieve a substantial reduction in income inequality in a short period of time (see Deininger and Squire, 1996a), such a rapid reduction may not be a viable option for most countries. Thus, finding the transmission mechanism may help to determine how changes in government policies can lower any negative impact that income inequality has upon economic growth. Of course, there may be other benefits and costs of such a policy and so, it is important to have a more complete picture as to how income inequality may affect growth. This paper explores one such link; how does income inequality affect the amount of funding that goes to public education and how does this funding affect economic growth? If income inequality does lead to more expenditures for public education, then what is the impact upon growth? Do the positive benefits of acquiring skills and knowledge outweigh the negative effect of the costs (e.g. distortionary taxation) of financing these expenditures? Although it has been widely reported that growth is increasing with human capital, this does not necessarily imply that the process of increasing human capital raises economic growth. Instead, there might be costs upon economic growth associated with augmenting the stock of human capital. This study finds that a higher level of income inequality is associated with more spending for public education. Although these expenditures have a negative impact upon growth contemporaneous with these public education expenditures, the impact upon future growth is positive. These empirical findings differ from those of Easterly and Rebelo (1993) who report that income inequality raises public expenditures for education, but they find that these expenditures are positively associated with growth. However, they treat education expenditures as an exogenous variable. The paper is constructed as follows. Section 2 presents a brief theoretical overview which formalizes some of the assumptions underlying the empirical model of Section 3. Section 3 also presents empirical findings. A conclusion follows.

The goal of this paper was to determine whether income inequality could be lowering growth by raising public expenditures for education. Countries with a higher level of income inequality also have higher subsequent expenditures for public education relative to GDP. These education expenditures have a negative impact upon contemporaneous growth, but previous expenditures have a positive impact. Admittedly, more work needs to be done in order to develop better estimates, but the paper does help to explain why increasing the level of human capital may not have a positive, immediate influence upon growth. In spite of any benefits which arise from a higher human capital stock, there are also costs associated with increasing this human capital and these costs may be providing one link as to why income inequality lowers growth. However, if public education expenditures are eventually beneficial to growth, the cost that income inequality exerts upon growth may only be a short-run cost. However, the paper leaves three issues open. First, what are the costs that these education expenditures induce? Is it distortionary taxation or is there some other explanation? Second, do different types of expenditures (primary vs. higher, for example) have different effects upon growth? Finally, what effect do education expenditures have upon future income inequality? Although many Saint-Paul and Verdier, 1992a and Saint-Paul and Verdier, 1992b, for example) have predicted that public education reduces income inequality, it is not clear that this need be the case. If poor children do not attend school because the opportunity cost is too high, if taxation is regressive, and if these expenditures are misallocated toward higher education at the expense of primary education, then these expenditures may not reduce income inequality and may even increase it. These issues are left for future work.