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Welfare and income effects of tuition subsidies and public investment in schooling

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  • Kumar, Alok

Abstract

Evidence demonstrates that poorer individuals have lower human capital attainment than richer individuals. This study constructs and estimates a two-sector dynamic stochastic general equilibrium model with human capital to analyse the welfare and income effects of different types of public schooling expenditure in India. The results show that tuition subsidies that are targeted towards the poor have a significantly positive effect on households’ income and welfare. Although the rich suffer welfare loss, aggregate welfare rises. Public schooling investment and untargeted tuition subsidies have a significantly positive effect on poor households’ income and welfare; however, the effect is smaller relative to tuition subsidies targeted at the poor. Public schooling investment has a larger impact on poor households’ human capital and income.

Suggested Citation

  • Kumar, Alok, 2025. "Welfare and income effects of tuition subsidies and public investment in schooling," Economic Modelling, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:ecmode:v:144:y:2025:i:c:s0264999324003584
    DOI: 10.1016/j.econmod.2024.107001
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    More about this item

    Keywords

    Public schooling investment; Tuition subsidies; Expenditure multipliers; Welfare; Poor households; India;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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