This paper studies a growth model with public and private education alternatives.
The impact of education vouchers for economic growth and the evolution of income
inequality are considered. Results indicate that introducing education vouchers can
increase economic growth. Households switching from public to private education experience higher incomes. This raises the tax base, in turn raising public education
expenditures and growth of the whole economy. Vouchers are found to generally in-
crease income inequality. Welfare comparisons show that voucher schemes may in some
cases gain majority support, depending on assumptions and parameters. The results
add a new dimension on which vouchers can be evaluated in the continuing policy