Children's learning environment and growth-promoting income redistribution

Bandyopadhyay, D and Tang, Xueli 2021, Children's learning environment and growth-promoting income redistribution, Macroeconomic Dynamics, pp. 1-45, doi: 10.1017/S1365100521000225.

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Title Children's learning environment and growth-promoting income redistribution
Author(s) Bandyopadhyay, D
Tang, XueliORCID iD for Tang, Xueli
Journal name Macroeconomic Dynamics
Start page 1
End page 45
Total pages 45
Publisher Cambridge University Press
Place of publication Cambridge, Eng.
Publication date 2021
ISSN 1365-1005
Keyword(s) Efficiency of the knowledge economy
Endogenous growth
Dynamic macroeconomics cost-benefit trade-off
Summary Abstract Bénabou [(2002) Econometrica 70, 481–517.] demonstrated how progressive redistribution mitigates unequal opportunity for education to promote growth. We ask how effective that policy is when it affects the average quality of education. So, we add a learning externality in his model of human capital accumulation. It captures how knowledge diffusion through global channels—such as a national educational curriculum—influences children’s learning outcomes and, hence, growth. Whether inequality is a curse or a blessing for economic growth depends on how efficiently an economy designs these channels and to what extent they influence children’s education. The greater this efficiency, the lower is the optimal progressiveness of income redistribution for maximizing the long-run output growth rate. Interestingly, if poorly designed global channels exert greater influence in education, the optimal progressivity may increase. Our quantitative analysis reveals new implications for redistributive policies, including a surprisingly low optimal progressivity (approximately 6–7%) for the calibrated US economy.
Language eng
DOI 10.1017/S1365100521000225
Field of Research 1401 Economic Theory
1402 Applied Economics
1403 Econometrics
HERDC Research category C1 Refereed article in a scholarly journal
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Document type: Journal Article
Collections: Faculty of Business and Law
Department of Economics
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