Education, Democracy and Growth

Abstract

This paper constructs a model where redistribution, determined by a political equilibrium, is in the form of public education. Public education is favourable for growth because it increases the level of human capital and at the same time it tends to produce a more even income distribution. The model is solved in the presence or absence of distortionary taxation. The main results are that for a given structure of political rights, more inequality may be good for growth if it implies more political support for education; increased political rights are good for growth and also imply a more equal income distribution; growth and inequality tend to decrease along the convergence path in the absence of political or distributional shocks. If distortions are important, these results may be qualified and one may obtain a hump-shaped relation between inequality and growth.