Democracy, Education, and Equality
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1 Democracy, Education, and Equality Many believe that equality of opportunity will be achieved when the prospects of children no longer depend upon the wealth and education of their parents. The institution through which the link between child and parental prospects may be weakened is public education. Many also believe that democracy is the political institution that will bring about justice. This publication asks whether democracy, modeled as competition between political parties that represent different interests in the polity, will result in educational funding policies that will, at least eventually, produce citizens who have equal capacities (human capital), thus breaking the link between family background and child prospects. In other words, will democracy engender, through the educational finance policies it produces, a state of equal opportunity in the long run? Several models of the problem are studied, which vary according to the educational technology posited, that is, the relationship between family inputs, school inputs, and the eventual human capital of the adult the child becomes. The main innovation of the publication is to model political competition between parties as ruthless. The policies that parties may choose lie in a very large policy space: they need be of any parametric functional form. Equilibrium in the game of party competition is a variant of the author s party-unanimity Nash equilibrium, or PUNE. is the Elizabeth S. and A. Varick Stout Professor of Political Science and Economics at Yale University. He has published extensively in economics, political philosophy, and political science. His recent books include Political Competition (2001), Equality of Opportunity (1998), Theories of Distributive Justice (1996), and A Future for Socialism (1994). He was elected a Fellow of the Econometric Society in 1986 and a Corresponding Fellow of the British Academy in 2005.
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3 Democracy, Education, and Equality Graz-Schumpeter Lectures Yale University
4 cambridge university press Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo, Delhi, Mexico City Cambridge University Press The Edinburgh Building, Cambridge cb2 8ru, UK Published in the United States of America by Cambridge University Press, New York Information on this title: / Graz Schumpeter Society 2006 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2006 A catalogue record for this publication is available from the British Library Library of Congress Cataloguing in Publication Data Roemer, John E. Democracy, education, and equality /. p. cm. (Econometric Society monographs ; no. 40) Includes bibliographical references and index. isbn-13: (hardback) isbn-10: x (hardback) isbn-13: (pbk.) isbn-10: (pbk.) 1. Politics and education Econometric models. 2. Democracy Economic aspects. 3. Educational equalization Econometric models. 4. Social choice Econometric models. 5. Human capital Econometric models. 6. Government aid to education Econometric models. 7. Equality Econometric models. I. Title. II. Series. lc71.r dc isbn Hardback isbn Paperback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. Information regarding prices, travel timetables, and other factual information given in this work is correct at the time of first printing but Cambridge University Press does not guarantee the accuracy of such information thereafter.
5 Contents Acknowledgments page vii 1 A Brief Overview 1 2 Models of Party Competition 11 3 Democratic Competition over Educational Investment 35 4 The Dynamics of Human Capital with Exogenous Growth 65 5 The Dynamics of Human Capital with Endogenous Growth 97 6 Estimation of Technological Parameters Conclusion 129 References 139 Appendix: Proofs of Theorems 143 Index 169
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7 Acknowledgments I began working on this topic five years ago, with Ignacio Ortuño-Ortin of the University of Alicante. Due to the physical distance between us, we eventually diverged into working separately on the problem. I am indebted to him for many early discussions, and, indeed, very possibly, for the initial formulation of the problem. Roger E. Howe and I spent hours working on some of the mathematical problems that arose. In particular, Theorem 4.2, on dynamics, is a collaboration. I owe a great deal to Roger, who has been my loyal mathematical consultant for some thirty years. Herbert Scarf showed me an elementary technique for verifying solutions to concave optimization problems on infinite dimensional spaces that I use throughout the analysis. John Geanakoplos, Joaquim Silvestre, Colin Stewart, Karine Van der Straeten, Juan D. Moreno-Ternero, and Cong Huang read versions of this work, more or less in that order over a period of years, and made important criticisms and suggestions. Joseph Altonji advised me on the econometric estimation in Chapter 6. I did not check all the details with him, so he is not responsible for any errors committed. I also received valuable advice on the appropriate data sets to use for the estimation in Chapter 6 from Carolyn Hoxby. My research assistant, Thomas Pepinsky, performed the data analysis and econometric estimation in that chapter. In the later stages, I had useful mathematical discussions with David Pollard and Cong Huang. Cong receives the credit for writing a computer program to carry out the dynamic simulation in Chapter 4, section E in real time. Finally, Matthew Jackson, vii
8 Acknowledgments as editor of the Econometric Society Monographs Series in which this volume appears, made helpful stylistic suggestions. I am grateful to all of these generous colleagues and students. This material was first presented as the Graz Schumpeter Lectures at the University of Graz in May I am extremely grateful to the Graz Schumpeter Society for that invitation. Professor Stefan Boehm, the Society s chairperson at the time, extended a most gracious welcome, and the lectures were a stimulating occasion, perfectly complemented by a weekend visit to the Styrian wine country. I believe the lectures fit properly within the scope of Joseph Schumpeter s interests, although that criterion may be too easily fulfilled, given Schumpeter s intellectual breadth. JER Yale University March 2005
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