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Fortunately high and rising income inequality in OECD countr

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Costanza Tomaselli

on 27 November 2013

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Transcript of Fortunately high and rising income inequality in OECD countr

What is income inequality?
The unequal distribution of household or individual income across the various participant in an economy
Idea of “fairness”
Gini coefficient

Fortunately high and rising income inequality in OECD countries may be good for increased public spending on education which in turn reduces income inequality.
EU 453: Week 8
Presentation by Stephanie Haffner and Costanza Tomaselli

Busemeyer, M.R. (2012) ‘Inequality and the political economy of education: An analysis of individual preferences in OECD countries’, Journal of European Social Policy 22(3), 219-240.
Atkinson, A. and E.Marlier (eds) (2010) Income and Living Conditions in Europe, Brussels: European Union, web document, ch.13 [by D.R. Williams].
Barr, N. (2012), ‘The Higher Education White Paper: The good, the bad, the unspeakable – and the next White Paper’, Social Policy and Administration, Issue 5.
Bowles, S. and Gintis, H. (1975) ‘The Problem with Human Capital Theory--A Marxian Critique,’ American Economic Review, 65(2), 74–82.
Friedman, M. (1955), ‘The Role of Government in Education’, in Solo, Robert A. (ed.), Economics and the Public Interest, New Brunswick, New Jersey: Rutgers University Press, pp. 123-44.
Gingerich, J. (2011) Making Markets in the Welfare State. The Politics of Varying Market Reforms, Cambridge: Cambridge University Press, e-book, ch.5.
Sylwester K. (2000), "Can education expenditures reduce income inequality?", Economics of Education Review 21 (2002), 43-52
Income inequality is high and increasing in OECD countries

Income inequality increases public spending
Meltzer and Richard model (1981)
Moene and Wallerstein (2001-2003)
Ansell theory (2008-2010)
Micro-level determinants of support for education spending
• Individual position in the income distribution does not have an impact
• Educational background = strongest effect
• Whether the respondent has children living in her household

Macro-level determinants of support for education spending
• Positive association with levels of socio-economic inequality
• Educational inequality does not have a direct effect
• The current level of education spending does not have a strong impact
• When socio- economic inequality increases, the income effect becomes more negative

High and rising income inequality in OECD countries may be good for increased public spending on education
The extent to which increased investments in education decrease socio-economic inequality strongly depends on the institutional context
High levels of educational inequality imply more restricted access to higher levels of education for people with low-income
Redistributive public spending reduces income inequality.

Investments in education have only an indirect impact on the inter- and intra-generational redistribution of resources
Conclusion: ambiguous results
Higher education spending reduces income inequality
We should expect a positive correlation
Higher education spending leads to improved human capital which creates higher economic growth (Barr, 2012)
Allocating an additional percentage point of GDP to public education is associated with a 1 point percentage drop in the Gini coefficient (Kevin Sylwester)
We should expect a negative correlation
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