Publicly provided education is a pervasive feature of modern economies. This dissertation studies the relationships between public education policies and the income level and income distribution. The second chapter provides a political economy explanation for the persistent differences in income distribution across countries over the past 30 years. The mechanism is the allocation of public education spending; it is the outcome of the interaction between an incumbent government and lobbies representing different socio-economic groups. Formation of lobbies is endogenous. Depending on parameters of the economy, the model generates different lobby formation equilibria and income distribution dynamics. In particular, in a more unequal economy, the rich tend to capture the political power, which in turn leads to more unequal income distribution for future generations, and vice versa.;The third chapter examines the effects of higher education policies of the US states on the performance of public colleges and universities. I derive a measure of college quality from early career earnings of individuals receiving a bachelor's degree in the 1992--93 academic year from a public college. Using instrumental variables to correct for individual selection into a state public college system, I find considerable variation in value-added by states' public college systems; relative to a baseline state, the value-added ranges from -30% to 50% of an average student's annual earnings. Using these performance measures, I then investigate the potential influences of various aspects of state higher education policy. I find that states with higher faculty quality and with more quality differentiation among public colleges generate higher value-added, whereas more expenditure per student does not appear to promote better performance.;The fourth chapter studies whether the optimal college for different students depends on their own types, or if all students are better off going to the highest ranked colleges. Using the same data set as in the third chapter, I derive a value-added measure of different types of colleges to different types of students. The results suggest that most students are better off attending the best colleges; meanwhile, there appears to be net gains in aggregate income from mixing certain types of students.
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