Will democracy implement long-run equality of opportunity when tax policy is simple?

Abstract

We model a dynamic political process in which, at each date, two parties form endogenously and compete on a unidimensional policy space of income-tax rates. After-tax income is dispensed for consumption and investment in the education of children. With no redistribution of income, inequality in the human capital of children in different dynasties persists forever. We ask whether democratic political competition will eliminate such inequality in the long-run, through the kind of educational financing that it implements. The answer depends upon the details of political competition and on the degree of skewness of the initial distribution of human capital. In a word, no guarantee exists that democracy will eliminate inequality of opportunity in the long-run.