The Distributional Bias of Public Education: Causes and Consequences Prepared by Era Dabla-Norris and Mark Gradstein1

2004 This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. While public education is often intended to be progressive in its effects on income distribution, in reality its incidence is often skewed toward the rich. This paper argues that the extent of this bias is directly related to institutional weaknesses in governance. We present a simple dynamic model where weak governing institutions allow the rich to be more effective in appropriating a larger share of public education spending thereby preventing inequality reduction. The empirical part provides tentative support for this view, showing that the progressiveness of public education spending is related to the strength of governance