Community, inequality, and local public goods

evidence from school financing in South Africa

Futoshi Yamauchi, Shinichi Nishiyama
fcnd discussion paper brief

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