The Politics of Public Provision of Education

Public provision of education is usually viewed as a form of redistribution in kind. However, does it arise when income redistribution is feasible as well? I analyze a two-dimensional model of political decision-making with endogenous political parties. Society chooses both the tax rate and the allocation of the revenues between income redistribution and public education. Agents differ in their income and in their age, where young agents prefer public education and the old prefer income redistribution. I find that when the cohort size of the young is not too large then public education arises as a political compromise between the rich and the young segment of the poor. They collude in order to reduce the size of government (which benefits the rich) and target some of its resources to education (which benefits the young poor). When the cohort size of the young is too large, however, income redistribution crowds out public provision of education in the political equilibrium.