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Documents in EconStor may• from the SSRN website:www. SSRN.com • from the RePEc website:www.RePEc.org• from the CESifo website:T www. CESifo-group.deT CESifo Working Paper No. 1934
REDISTRIBUTION OR EDUCATION? THE POLITICAL ECONOMY OF THE SOCIAL RACE AbstractIn an overlapping generations model with two social classes, rich and poor, parents of the different social classes vote on two issues: redistributive policies for them and education investments for their kids. Public education is the engine for growth through its effect on human capital; but it is also the vehicle through which kids born from poor families may exchange their positions with kids born from rich families. This is because education reduces the probability of the mismatch, i.e. individuals with low talent but coming from rich families being placed in jobs which should be reserved to people with high talent (and vice-versa). We find a political economy equilibrium of the voting game using probabilistic voting. When the poor are more politically influent, the economy is characterized by a higher level of education, growth and social mobility than under political regimes supported by the rich; pretax inequality is greater in the first case, but post-tax is lower.JEL Code: J62, J24, H10.Keywords: social mobility, talents' mismatch, probabilistic voting. "... For if the son of a golden or silver parent has an admixture of brass and iron, then nature orders a transposition of ranks, and the eye of the ruler must not be pitiful towards the child because he has to descend the scale and become a husbandman or artisan, just as there may be sons of artisans who having an admixture of gold or silver in them are raised to honour, and become guardians or auxiliaries. For an oracle says that when a man of brass or iron guards the State, it will be destroyed" [Plato, 414 D, circa
IntroductionIn a social race individuals of different social classes compete to improve their economic positions. The outcome of this competition depends on individual talent, individual and family behavior, and on public policies. This paper analyzes the effects of two public transfer programs, redistribution and education, on the outcome of a social race between two social classes, the rich and the poor. In an intergenerational setting we explore the economic motivations and the political process leading parents to choose redistributive policies fo...