Recent evidence suggests that social mobility has declined in many developed countries despite some of them pursuing proactive redistribution policies. In this paper we characterize the optimal mix of income tax and education policies that a government should adopt to maximize a long-term social objective that includes considerations for income redistribution and upward mobility. We show that switching from an elitist to a meritocratic education system, or from a short-term to a long-term vision of social welfare, fosters upward mobility but it can sometimes lead to increased inequality.

We investigate the relationship between inequality and public education funding in a model of probabilistic voting where the private option is available and voting participation di¤ers across income groups. A change in inequality can have opposite

effects at di¤erent income levels: higher inequality decreases public spending per student and increases enrollment in public schools in poor economies, while the opposite holds in the rich ones. A change in the tax base can also have non- monotonic effects. These novel theoretical predictions, with support in U.S. school district-level data, reconcile previous contradictory results in the political economy literature on redistribution and inequality.

In this paper, we introduce novel estimates of wealth inequality, integrating the standard household wealth concept with newly assessed individual human capital. Using microdata and national accounts from numerous countries since 1979, we explore the distribution across age, gender, education, and occupation. Our analysis reveals two key findings: human capital is more evenly distributed than financial capital, and total wealth, the sum of human and financial capital, is significantly more equal than financial wealth alone. This study offers a groundbreaking perspective on global wealth dynamics, emphasizing the critical, yet often overlooked, role of human capital in wealth distribution.

Existing literature shows that re-distribution does not play an important role for determining optimal income tax rates when skilled agents invest in education. This paper departs from the literature by adding government policy on subsidies and regulation of higher education. I conclude that in the short run optimal income tax rates are crucially influenced by the re-distribution issue. Moreover, the conclusion about optimal declining or rising marginal tax rates at the top is mostly determined by educational income inequality. For empirically plausible simulations under an inequality averse social planner, a more unequal educational economy justifies rising marginal tax rates at the top.