On the political economy of means-tested education vouchers

We use computational experiments to study the impact of means-tested education vouchers on the level and distribution of educational expenditures. Our benchmark is a regime where public and private schools coexist. Our means-tested voucher regime is one where households with lower incomes receive a larger voucher. Both the level of funding and the allocation of vouchers by income are endogenously determined by sequential majority voting. We examine the effect on educational expenditures of switching from a mixed public/private education regime to a means-tested voucher regime or to a uniform voucher regime where all households receive the same voucher. We find that: (i) Under means-tested vouchers, public funding for education is the smallest but average educational expenditure is the largest; (ii) inequality of educational resources is smaller under means-tested than that under uniform vouchers or the mixed regime; (iii) the 'poor' and the 'rich' households prefer means testing to either the mixed or uniform regime. (C) 2000 Elsevier Science B.V. All rights reserved.