Are educational policies elitist?

This paper analyses the link between public education expenditure and human capital inequality. I build a model of human capital formation where government intervention in education is justified by the existence of credit constraints. The framework provides conditions on the level of economic development and income inequality under which the educational policies are elitist, that is, they increase the spread between the educational achievement of bright and less bright individuals. With the use of the measures of educational inequality constructed for both developed and developing countries by Castello and Domenech, I also present descriptive evidence that provides some support to the model's predictions.