Rethinking the role of government in education: Private education tuition waivers and public education

Abstract

This study evaluates the different impacts of public education and private education tuition waivers on human capital growth, fertility rates, and income inequality using an overlapping generations model with a child quality–quantity tradeoff. Numerous studies have confirmed that private (public) education facilitates higher (lower) human capital growth and lower (higher) fertility rates but widens (narrows) the income gap. We reveal that these findings only hold in the short term, while the opposite may be true in the long term. Regarding the latter, public education may eventually crowd out private education and increase the fertility rates of poor households. In addition, private educational disparity may be passed down intergenerationally and thus reinforced, increasing income inequality. Conversely, private education subsidies may reduce income inequality. Therefore, based on per capita utility, the government should improve population quantity through public education in the short term and population quality through private education subsidies in the long term.*