[Excerpt] The primary purpose of this paper is to empirically test among both the intra- and the inter-generational version of these three hypotheses for higher (i.e. post-secondary) levels of education for one less developed country, Kenya. A secondary purpose is to investigate other economic aspects of spending on higher education, most notably the question of horizontal equity in school finance. Before proceeding, a methodological point is in order. There is no consensus in the public economics literature on what is a suitable criterion for assessing the equitability of a fiscal programme. At least three criteria may be distinguished (the terminology is my own): (1) The Equal Opportunity Criterion. By this criterion, a fiscal programme is equitable if different groups in the population have access to the programme in proportion to their numbers in the population, irrespective of the costs paid by the different groups in relation to benefits received. (2) The Cost-Benefit Criterion. By this criterion, a fiscal programme is equitable if the costs paid by different groups in the population are proportional to the benefits they each receive, irrespective of access to the programme. (3) The Ability to Pay Criterion. By this criterion, due to diminishing marginal utility of income, a programme is equitable if the cost-benefit ratio of the programme rises as a function of income. Evidently, when confronted with a given set of facts, these criteria may yield very different qualitative judgements about the equitability of a fiscal programme. We note that the cost-benefit and the equal opportunity criteria apply horizontally (i.e. between individuals in the same income class) as well as vertically (i.e. for comparisons across income classes). Note also that the equal opportunity criterion refers primarily to infer-generational distributional effects, whereas the other two are primarily intra-generational.
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