Education versus cash redistribution. The lifetime context

Abstract

Education looks more powerful relative to cash redistribution when viewed in the context of lifetime rather than an annual income. The reason is that transitory income and family size affect the pattern of annual cash redistribution and both of them vary less across lifetimes than in individual years. Education may look even more powerful if the lifetime context is taken to include the period of childhood. For it is easier to target education to people whose childhood incomes are low than towards people whose adult incomes will be low. To analyse these issues one needs to compare the equalising power of a policy across income distributions that differ in their initial level of equality. We develop a method of doing this, using the Atkinson equality measure. © 1979.