The Political Economy of Public Spending on Education, Inequality, and Growth by Mark Gradstein published by World Bank (11/2003).
Public provision of education has often been perceived as universal and egalitarian, but in reality it is not. Political pressure typically results in incidence bias in favor of the rich. This paper argues that the bias in political influence resulting from extreme income inequalities is particularly likely to generate an incidence bias, which we call social exclusion. This may then lead to a feedback mechanism whereby inequality in the incidence of public spending on education breeds higher income inequality, thus generating multiple equilibria: with social exclusion and high inequality; and with social inclusion and relatively low inequality. The paper also shows that the latter equilibrium leads to higher long-run growth than the former. An extension of the basic model reveals that spillover effects among members of social groups differentiated by race or ethnicity may reinforce the support for social exclusion.
Factor Endowments, Inequality, and Paths of Development Among New World Economies by Stanley L. Engerman, Kenneth L. Sokolof published by NBER (10/2002).
We would like to express deep appreciation for the help of our research assistants Elisa Mariscal, Patricia Juarez, and Leah Brooks. We have also benefited from discussions with Stephen Haber, Daron Acemoglu, George Alter, Sam Bowles, Roberto Cortés Conde, Lance Davis, Gerardo della Paolera, David Dollar, William Easterly, David Eltis, Jeff Frieden, the late Robert Gallman, Claudia Goldin, Aurora Gomez, Avner Greif, Karla Hoff, Lawrence Katz, Daniel Kaufmann, Zorina Khan, Naomi Lamoreaux, Margaret Levenstein, Ross Levine, Frank Lewis, Peter Lindert, Nora Lustig, Douglass North, James Robinson, Jean-Laurent Rosenthal, Elyce Rotella, Jon Skinner, Joel Slemrod, Federico Sturzenegger, William Summerhill, Alan Taylor, Peter Temin, Mariano Tommasi, Dan Treisman, Miguel Urquiola, John Wallis, Jeffrey Williamson, Gavin Wright, and participants in presentations at Harvard, McGill, Stanford, Yale, Michigan, Indiana, Dartmouth, UC Davis, UC Berkeley, Washington University, the Santa Fe Institute, the NEUDC, and the meeting of the Economia panel held in Cambridge, May 2002. We gratefully acknowledge the financial support we have received from the National Science Foundation, as well as from the Academic Senate and International Studies and Overseas Programs at the University of California, Los Angeles. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research.
