The Political Economy of Publicly Provided Private Goods

Abstract Traditional Political Economy models typically imply a strong relationship between income inequality and public intervention in redistributive policies. Empirical evidence suggests that this may hold true only for certain kinds of policies, for instance cash transfers or education, but in the case of other policies with redistributive effects such as social security and some publicly provided private goods this may not hold true. Abstract In this paper I develop a method to derive the sign of the relationship between income inequality and degree of public intervention in education in a Probabilistic Voting model in which the consumers-voters are also allowed to choose other forms of redistribution. Abstract I show that the relationship between income inequality and governmental intervention implied in the traditional literature is mainly a result of the restrictive assumptions of those models. Abstract I also show that this method can deliver sharp predictions even in presence of those non-convexities in individual preferences that are usually described as a feature induced by public provision of education in the traditional literature in Public Economics. Abstract I argue that the relationship between income inequality and public intervention in schooling is a natural and promising field in which the tool proposed can be useful for empirical purposes and that can help to better explain some patterns described in the literature about public intervention in education.