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EVOLUTION OF THE INCOME DISTRIBUTION AND EDUCATION VOUCHERS

Published online by Cambridge University Press:  06 April 2004

ELIZABETH M. CAUCUTT
ELIZABETH M. CAUCUTT
Affiliation:
University of Rochester
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Abstract

In this paper, I study the effect that switching to a voucher system of educational finance has on the distribution of income. The model is calibrated to U.S. data, and simulated for two different forms of education finance: a voucher system and a completely private system of schools. All voucher policies considered result in welfare gains and reductions in income inequality. A private system entails a welfare loss and an increase in income inequality. The more important the peer group is to future income, the smaller the welfare gains and reductions in inequality associated with voucher systems, and the greater the welfare cost and increase in inequality associated with a private system.

Keywords

EducationVouchersPeer EffectsIncome Distribution
Type
Research Article
Information
Macroeconomic Dynamics , Volume 8 , Issue 2 , April 2004 , pp. 226 - 249
Copyright
© 2004 Cambridge University Press

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