28
within this group we should look tendencies toward lower wages, crowding out due to foreign
competition and/or technology. However, people with no formal education are definitely not
more sheltered than the high educated in the large public sector in Denmark.
In an attempt to: Explaining International and Intertemporal Variations in Income Inequality,
Li, Squire and Zou (1998) find that initial equality affects the political economy. It could be
preventing the rich from lobbing in favour of for their own interest alone, like low taxes and
high quality pay-schools for their own children. Moreover efficient capital market makes it
possible for all talented people to undertake productive investment such as education, and
capital markets are likely to be effected by initial equality. In Denmark mandatory schools /
high schools have the same (high) standard all over the country. Vocational education as well
as further education are available for all. High income, high equality economies are
reproducing themselves both though the political system and trough the capital market. In a
theoretical framework the latter is also shown by Chiu (1998). Persson (1995) shows that if
pre-tax wage inequality is low, all agents will unanimously be in favour of tax on labour
income, and there will be a tendency for taxes to be high. This most indeed goes for Denmark.
Moreover, as shown by Evans and Karras (1994) for 48 U.S. states, public educational services
are productive to the private sector.