Self-interest and public funding of education

The objective of this paper is to study whether publicly funded education can emerge as a political and economic equilibrium in an overlapping generations economy in which selfish agents vote for public funding of education. The presence of complementarities between capital and labor in the production function implies that, by improving the skills of next periodʹs workers, public funding of education increases the return on capital. As a result, savers will support a publicly financed education system in order to enhance their future income. A version of the model calibrated using U.S. data generates large shares of GNP allocated to education. Hence the non-altruistic incentive to support public education is quantitatively important.