Inequality and the politics of redistribution

This study analyzes the political economy of public education and in-cash transfer with an overlapping-generations model that features a two-class society. In this model, the dynamics of inequality are driven by the accumulation of human capital. The two redistributive policies are determined by voting, while private education, which supplements public education, is purchased individually. The model, which includes two-dimensional voting, yields the following two types of stable, steady-state equilibria: a high-inequality equilibrium with government expenditures favoring lump-sum transfers or a low-inequality equilibrium with such expenditures favoring public education.