California Center for Population Research

In most democracies, the majority of education expenditures is financed by the government. In non-democracies, we observe a wide variation in the mix of public and private funding of education. In addition, countries with high inequality tend to rely more heavily on private schooling. We develop a theory which integrates private decisions on education and fertility with voting on public schooling expenditures. The theory is able to account for the facts mentioned above. Countries with high inequality exhibit more private education expenditures since rich people opt out of the public system. In non-democracies, concentration of political power leads to multiple equilibria in the determination of public education spending.