Two-sided intergenerational transfer policy and economic development: A politico-economic approach
AbstractWe consider an overlapping generations model with public education and social security financed by labor income taxation, in which the overall size of these policies is determined in a repeated majority voting game. We investigate the interaction between these policies and economic development in stationary Markov perfect equilibria. In the politico-economic equilibrium, the labor income tax rate is represented as a linear increasing function of the ratio of the decisive voter's human capital and the average human capital level. A high level of initial income inequality reduces the size of public policies and retards economic growth.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 36 (2012)
Issue (Month): 9 ()
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Web page: http://www.elsevier.com/locate/jedc
Public education; Social security; Markov perfect equilibrium; Income inequality; Economic development;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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