Financing public education when agents have retirement concerns

Abstract

We study, theoretically and empirically, the link between voters' support for public education and pensions. We show that the (inter‐generational) redis-tributive component of the retirement system creates a link between current spending on education and future pensions. Specifically, investments in edu-cation increase the young's productivity and, hence, future tax proceeds that will finance the current workers' pension. Consequently, the support for publicly financed education grows together with the generosity and degree of redistribution of the retirement system. The empirical analysis uses repeated cross‐country surveys to confirm the model predictions.