Influence of Public Funding for Education on Distribution Inequality of Human Capital

Under the condition that government´s budget constraint binds, this paper studies the influence of public funding for education on the distribution inequality of human capital in an overlapping-generations model. When there are no tuition fees, the result shows that the distribution inequality of human capital is expanded by the increase of public funding for education. But when tuition fee is positive, the distribution inequality is reduced then extended with the increase of public funding for education. Numerical simulation analysis proves these results to be right. Further analysis indicates that result depend crucially on the interaction of both private and public funding for education and the other redistribution items. So public fiscal policy should focus on the equilibrium among these factors.