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Allocating Collective Expenditure: The Case of Education

Author

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  • Stichnoth, Holger
  • Riedel, Lukas
Abstract
Creating distributional national accounts (DINA; e.g. Piketty, Saez, and Zucman 2018) requires the allocation of all government expenditure to individuals in order to compute their post-tax, post-transfer income. A sizeable part of government expenditure is in-kind spending, either in the form of individualized transfers (e.g., Medicare and Medicaid) or of collective consumption expenditure (e.g., education, defense, and the general legal and administrative infrastructure). Because of data limitations, the existing DINA studies allocate the collective consumption expenditure either proportionally to post-tax cash income (in which case it is distributionally neutral) or as a lump-sum transfer. In this paper we provide evidence on the way some of the collective consumption expenditure is actually distributed. We focus on public spending on education, which makes up about 5% of national income in most OECD countries. We find that, in Germany at least, education spending tends to go disproportionately to the bottom half of the post-tax cash income distribution, so the proportionality assumption adopted in the DINA literature does not work very well in the cross-section. However, this regressivity is driven by strong age effects. Moving beyond the cross-section, we find that individuals with higher lifetime earnings or better educated parents have indeed received substantially more in terms of public education spending.

Suggested Citation

  • Stichnoth, Holger & Riedel, Lukas, 2021. "Allocating Collective Expenditure: The Case of Education," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242363, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc21:242363
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    References listed on IDEAS

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    1. Thomas Blanchet & Lucas Chancel & Amory Gethin, 2019. "How Unequal is Europe? Evidence from Distributional National Accounts, 1980-2017," World Inequality Lab Working Papers hal-02877000, HAL.
    2. Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2018. "Distributional National Accounts: Methods and Estimates for the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(2), pages 553-609.
    3. Timm Bönke & Giacomo Corneo & Holger Lüthen, 2015. "Lifetime Earnings Inequality in Germany," Journal of Labor Economics, University of Chicago Press, vol. 33(1), pages 171-208.
    4. Karl Widerquist, 2018. "The Bottom Line," Exploring the Basic Income Guarantee, in: A Critical Analysis of Basic Income Experiments for Researchers, Policymakers, and Citizens, chapter 0, pages 93-98, Palgrave Macmillan.
    5. Jorrit Zwijnenburg, 2019. "Unequal Distributions: EG DNA versus DINA Approach," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 296-301, May.
    6. Facundo Alvaredo & Lucas Chancel & Thomas Piketty & Gabriel Zucman, 2018. "Distributional National Accounts," Post-Print halshs-03342488, HAL.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    inequality; redistribution; education; in-kind transfers;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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