Year of Graduation
The Role of Public and Private Education At The Transition From Stagnation To Development
Joint HSE-NES Undergraduate Program in Economics
In this paper, I present a dynamic model that shows how a society which initially consists of capitalists and workers endogenously comes to the disappearance of classes. The reason for this was the industrial revolution, as a result of which the return on physical capital increased, and the importance of human capital for production also increased. This served as an incentive for capitalists to invest in public education for workers. As a result, the level of human capital and the income of workers increased, and it was the demise of the class structure. There are public and private education in the model. Private education requires more investment and has a higher return. The existence of a choice between public and private education led to the fact that different countries have chosen different paths of development, and this has affected the level of income inequality. Income inequality is lower, taxes are higher in countries which have chosen the path of universal public education than in countries which have developed both private and public education. The model predicts that income inequality and public education will disappear in the process of development.