Community, inequality, and local public goods, evidence from school financing in South Africa uri icon


  • 'To examine how local income distribution affects both a community's ability to pay for schooling and the quality of that schooling, this research merges household and school census data from South Africa. Empirical results are twofold. First, while the median income and the average household income increase school fees, inequality inhousehold income (standard deviation) decreases school fees, which indicates that the lower tail of income distribution pulls down school fees. Second, an increase in school fees significantly improves school quality, decreasing the learner-educator ratio and increasing the number of nonsubsidized educators. The result is consistent with (1) strategic behavior of the low-income group and (2) optimal school fee determination with incomplete interhousehold income transfers. Empirical results and simulations demonstrate the possibility that income and asset inequality may reduce the quality of public goods, decreasing human capital and income growth for the next generation.' -- Authors' Abstract
  • Yamauchi and Nishiyama are interested in the relationship between local inequality and the quality of human capital investment and growth. In this paper, they examine the impact of unequal income distribution on the ability of a community to finance local schools in South Africa. To this end, they conduct two analyses, one empirical and the other based on simulations... This study clearly shows that income inequality negatively affects school fees and pulls down the average quality of education, which adversely affects human capital in the next generation. Policy interventions are needed to stop this vicious cycle. Government subsidies must be increased to those communities that are trapped in a situation where they cannot collect sufficient school fees to maintain an adequate education system.' -- from Text

publication date

  • 2005
  • 2005