Hostname: page-component-78c5997874-t5tsf Total loading time: 0 Render date: 2024-11-14T01:26:38.701Z Has data issue: false hasContentIssue false
  • English
  • Français

CHILDREN’S LEARNING ENVIRONMENT AND GROWTH-PROMOTING INCOME REDISTRIBUTION

Published online by Cambridge University Press:  09 July 2021

Debasis Bandyopadhyay  and
Xueli Tang
Debasis Bandyopadhyay*
Affiliation:
University of Auckland
Xueli Tang
Affiliation:
Deakin University
*
Address correspondence to: Debasis Bandyopadhyay, 12 Grafton Road, OGGB (Level 6), Department of Economics, The University of Auckland, Auckland 1142, New Zealand. e-mail: [email protected]. Phone: 64 9 923 7439.
Get access Rights & Permissions [Opens in a new window]

Abstract

Bénabou [(2002) Econometrica 70, 481–517.] demonstrated how progressive redistribution mitigates unequal opportunity for education to promote growth. We ask how effective that policy is when it affects the average quality of education. So, we add a learning externality in his model of human capital accumulation. It captures how knowledge diffusion through global channels—such as a national educational curriculum—influences children’s learning outcomes and, hence, growth. Whether inequality is a curse or a blessing for economic growth depends on how efficiently an economy designs these channels and to what extent they influence children’s education. The greater this efficiency, the lower is the optimal progressiveness of income redistribution for maximizing the long-run output growth rate. Interestingly, if poorly designed global channels exert greater influence in education, the optimal progressivity may increase. Our quantitative analysis reveals new implications for redistributive policies, including a surprisingly low optimal progressivity (approximately 6–7%) for the calibrated US economy.

Keywords

Efficiency of the knowledge economyEndogenous growthProgressivityDynamic macroeconomic cost–benefit trade-off
Type
Articles
Information
Macroeconomic Dynamics , Volume 26 , Issue 8 , December 2022 , pp. 2029 - 2085
Copyright
© Cambridge University Press 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We gratefully acknowledge two anonymous referees and the coeditor Oded Galor for their valuable comments and helpful suggestions, which were critical for reconstructing this paper. We also thank Roland Bénabou, Dirk Krueger, Roberto Foa, Kaushik Basu, Debraj Ray, Dilip Mookherjee, and Alexandre Dmitriev for their valuable comments on earlier drafts of this paper. The usual disclaimer applies.

References

Aghion, P. and Jaravel, X. (2015) Knowledge spillovers, innovation and growth. Economic Journal 125, 533–573.CrossRefGoogle Scholar
Alesina, A. and La Ferrara, E. (2005) Ethnic diversity and economic performance. Journal of Economic Literature 43, 762–800.CrossRefGoogle Scholar
Ashraf, Q. and Galor, O. (2013) The “Out of Africa” hypothesis, human genetic diversity, and comparative economic development. American Economic Review 103, 1–46.CrossRefGoogle Scholar
Bandyopadhyay, D. and Tang, X. (2011) Parental nurturing and adverse effects of redistribution. Journal of Economic Growth 16, 71–98.CrossRefGoogle Scholar
Banerjee, A. V. and Moll, B. (2010) Why does misallocation persist? American Economic Journal: Macroeconomics 2(1), 189–206.Google Scholar
Barro, R. J. and Lee, J. W. (2013) A new data set of educational attainment in the world, 1950–2010. Journal of Development Economics 104, 184–198.CrossRefGoogle Scholar
Barro, R., Mankiw, G. and Sala-i-Martn, X. (1995) Capital mobility in neoclassical models of growth. American Economic Review 85, 103–115.Google Scholar
Bénabou, R. (1996) Heterogeneity stratification and growth: Macroeconomic implication of community structure and school finance. American Economic Review 86, 584–609.Google Scholar
Bénabou, R. (2002) Tax and education policy in a heterogeneous-agent economy: What levels of redistribution maximize growth and efficiency? Econometrica 70, 481–517.CrossRefGoogle Scholar
Bofota, Y. B., Boucekkine, R. and Bala, A. P. (2016) Social capital as an engine of growth: Multisectoral modeling and implications. Macroeconomic Dynamics 20(8), 2093–2122.CrossRefGoogle Scholar
Caselli, F. and Ciccone, A. (2013) The contribution of schooling in development accounting: Results from a nonparametric upper bound. Journal of Development Economics 104, 199–211.CrossRefGoogle Scholar
Caucutt, E. M., Imrohoroglu, S. and Kumar, K. (2003) Growth and welfare analysis of tax progressivity in a heterogeneous-agent model. Review of Economic Dynamics 6, 546–577.CrossRefGoogle Scholar
Cavalcanti, T. V. V. and Giannitsarou, C. (2017) Growth and human capital: A network approach. Short title: Growth, human capital and networks. Economic Journal 127, 1279–1317.CrossRefGoogle Scholar
Cavalcanti, T. V. V., Giannitsarou, C. and Johnson, C. (2017) Network cohesion. Economic Theory 64, 1–21.CrossRefGoogle Scholar
Chiu, J., Meh, C. and Wright, R. (2017) Innovation and growth with financial, and other, frictions. International Economic Review 58, 95–125.CrossRefGoogle Scholar
Comin, D., Easterly, W. and Gong, E. (2010) Was the wealth of nations determined in 1000 BC? American Economic Journal: Macroeconomics 2(3), 65–97.Google Scholar
Cohen, D. and Soto, M. (2007) Growth and human capital: Good data, good results. Journal of Economic Growth 12, 51–76.CrossRefGoogle Scholar
de la Croix, D. and Doepke, M. (2003) Inequality and growth: Why differential fertility matters. American Economic Review 93(4), 1091–1113.CrossRefGoogle Scholar
Dutt, A. K. and Veneziani, R. (2020) A classical model of education, growth, and distribution. Macroeconomic Dynamics 24(5), 1186–1221.CrossRefGoogle Scholar
Easterly, W. and Levine, R. (1997) Africa’s growth tragedy: Policies and ethnic divisions. Quarterly Journal of Economics 112(4), 1203–1250.CrossRefGoogle Scholar
Erosa, A. and Koreshkova, T. (2007) Progressive taxation in a dynastic model of human capital. Journal of Monetary Economics 54, 667–685.CrossRefGoogle Scholar
Fernández, R. and Rogerson, R. (1998) Public education and income distribution: A dynamic quantitative evaluation of education-finance reform. American Economic Review 88(4), 813–833.Google Scholar
Galor, O. and Moav, O. (2004) From Physical to Human Capital Accumulation: Inequality and the Process of Development. Review of Economic Studies 71, 1001–1026.CrossRefGoogle Scholar
Galor, O. and Moav, O. (2006) Das human-kapital: A theory of the demise of the class structure. Review of Economic Studies 73, 85–117.CrossRefGoogle Scholar
Galor, O., Moav, O. and Vollrath, D. (2009) Inequality in landownership, the emergence of human-capital promoting institutions, and the great divergence. Review of Economic Studies 76, 143–179.CrossRefGoogle ScholarPubMed
Galor, O. and Tsiddon, D. (1997) The distribution of human capital and economic growth. Journal of Economic Growth 2, 93–124.CrossRefGoogle Scholar
Galor, O. and Zeira, J. (1993) Income distribution and macroeconomics. Review of Economic Studies 60, 35–52.CrossRefGoogle Scholar
Glaeser, E. L., La Porta, R., Lopez-De-Silanes, F. and Shleifer, A. (2004) Do institutions cause growth? Journal of Economic Growth 9, 271–303.CrossRefGoogle Scholar
Glaeser, E. L., Ponzetto, G. and Shleifer, A. (2007) Why does democracy need education? Journal of Economic Growth 12, 77–99.CrossRefGoogle Scholar
Glomm, G. and Ravikumar, B. (1992) Public versus private investment in human capital: Endogenous growth and income inequality. Journal of Political Economy 100, 818–834.CrossRefGoogle Scholar
Growiec, J. (2010) Human capital, aggregation, and growth. Macroeconomic Dynamics, 14(2), 189–211.CrossRefGoogle Scholar
Hanushek, E. A. (1992) The trade-off between child quantity and quality. Journal of Political Economy 100(1), 84–117.CrossRefGoogle Scholar
Hanushek, E. A. and Woessmann, L. (2007) The role of school improvement in economic development. NBER Working Paper 12832.CrossRefGoogle Scholar
Heathcote, J., Storesletten, K. and Violante, G. (2017) Optimal tax progressivity: An analytical framework. Quarterly Journal of Economics 132(4), 1693–1754.CrossRefGoogle Scholar
Hoxby, C. M. (2008) School spending, income, and inequality: The efficient redistribution hypothesis. Working Paper, Stanford University.Google Scholar
Jappelli, T. (1990) Who is credit constrained in the U.S. economy? Quarterly Journal of Economics 105, 219–234.CrossRefGoogle Scholar
Jones, B. F. (2014) The human capital stock: A generalized approach. American Economic Review 104(11), 3752–3777.CrossRefGoogle Scholar
Jovanovic, B. and Rob, R. (1989) The growth and diffusion of knowledge. Review of Economic Studies 56(4), 569–582.CrossRefGoogle Scholar
Kohara, M. and Horioka, C. (2006) Do borrowing constraints matter? An analysis of why the permanent income hypothesis does not apply in Japan. Japan and the World Economy 18, 358–377.CrossRefGoogle Scholar
Krueger, D. and Ludwig, A. (2013) Optimal progressive labor income taxation and education subsidies when education decisions and intergenerational transfers are endogenous. American Economic Review: Papers & Proceedings 103(3), 496–501.CrossRefGoogle Scholar
Maoz, Y. D. and Moav, O. (1999) Intergenerational mobility and the process of development. Economic Journal 109(458), 677–697.CrossRefGoogle Scholar
Manuelli, R. E. and Seshadri, A. (2014) Human capital and the wealth of nations. American Economic Review 104(9), 2736–2762.CrossRefGoogle ScholarPubMed
Matsuyama, K. (2002) The rise of mass consumption societies. Journal of Political Economy 110(5), 1035–1070.CrossRefGoogle Scholar
Michalopoulos, S. (2012) The origins of ethnolinguistic diversity. American Economic Review 102, 1508–1539.CrossRefGoogle ScholarPubMed
Mookherjee, D. and Ray, D. (2002) Is equality stable? American Economic Review 92(2), 253–259.CrossRefGoogle Scholar
Mukoyama, T. (2004) Diffusion and innovation of new technologies under skill heterogeneity. Journal of Economic Growth 9, 451–479.CrossRefGoogle Scholar
Owen, A., Videras, J. and Davis, L. (2009) Do all countries follow the same growth process? Journal of Economic Growth 14, 265–286.CrossRefGoogle Scholar
Pritchett, L. (2004) Access to education. In: Lomborg, B. (ed.) Global Crises, Global Solutions. Cambridge: Cambridge University Press.Google Scholar
Raurich, X., Sánchez-Losada, F. and Vilalta-Buf, M. (2015) Knowledge misallocation and growth. Macroeconomic Dynamics 19(7), 1540–1564.CrossRefGoogle Scholar
Rosenzweig, M. R. and Wolpin, K. (1994) Are there increasing returns to the intergenerational production of human capital? Maternal schooling and child intellectual achievement. Journal of Human Resources 29(2), Special Issue: Women’s Work, Wages, and Well-Being, 670–693.CrossRefGoogle Scholar
Solow, R. M. (1992) Growth with Equity Through Investment in Human Capital. The George Seltzer Distinguished Lecture, Industrial Relations Center, University of Minnesota.Google Scholar
Spolaore, E. and Wacziarg, R. (2009) The diffusion of development. Quarterly Journal of Economics 124(2), 469–529.CrossRefGoogle Scholar
Tamura, R. (1991) Income convergence in an endogenous growth model. Journal of Political Economy 99, 522–540.CrossRefGoogle Scholar
Tamura, R. (1996) From decay to growth: A demographic transition to economic growth. Journal of Economic Dynamics and Control 20, 1237–1261.CrossRefGoogle Scholar
Tang, X. and King, I. (2005) A comment on “Roland Bénabou’s” tax and education policy in a heterogeneous-agent economy: What levels of redistribution maximize growth and efficiency? Econometrica 73, 1003–1004.CrossRefGoogle Scholar
UNU-WIDER (2018) World Income Inequality Database (WIID4). https://www.wider.unu.edu/database/world-income-inequality-database-wiid4 Google Scholar
Viaene, J.-M. and Zilcha, I. (2009) Human capital and inequality dynamics: The role of education technology, Economica 76, 760–778.CrossRefGoogle Scholar
Zhang, J. (2003) Optimal debt, endogenous fertility, and human capital externalities in a model with Altruistic bequests. Journal of Public Economics 87, 1825–1835.CrossRefGoogle Scholar