Public education or vouchers? The importance of heterogeneous preferences

Abstract

This paper looks at the impact heterogeneous preferences for education have on education funding under private, public and voucher systems. An overlapping generations model incorporating human capital is used, where parents are the decision-makers. They determine their labour supply and their child's education - either directly with personal contributions or collectively by voting on taxes. The education systems are compared by their impact on the growth and distribution of human capital. The use of heterogenous preferences proves to be critical, as these comparisons differ markedly from the homogenous case.