Democratic Choice of an Education System: Implications for Growth and Income Distribution

We use an OLG model to examine democratic choice betweentwo modes of government support for education: subsidies forprivately purchased education and free uniform public provision.We find little conflict between democracy and growth: the samefactors that generate popular support for subsidization overfree uniform provision—large external benefits, a largeexcess burden, and little inequality—also favor its relativegrowth performance. Furthermore, restricting the franchise toan upper-income elite may also reduce growth. Two extensionsexamine the effect of intergenerational mobility and indicatethe theoretical possibility of periodic swings in the balancebetween public and private spending.