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Human Capital Investment and Globalization in Extortionary States

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Author Info
Andersson, Fredrik (Lund University)
Konrad, Kai A. () (Free University of Berlin and IZA, Bonn)

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Abstract

This paper considers education investment and public education subsidies in closed and open economies with an extortionary government. The extortionary government in a closed economy has incentives to subsidize education in order to overcome a hold-up problem of time consistent taxation, similar to benevolent governments. The two types of government differ in their education policies if highly productive labor is fully mobile. Extortionary governments’ incentives for education subsidies vanish and they even have an incentive to prevent individuals from mobility increasing education investment. Tax competition therefore reduces hold-up problems of time consistent extortionary taxation, but also introduces incentives that reduce workers’ utility.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 239.

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Length: 28 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:iza:izadps:dp239

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Related research
Keywords: Globalization; commitment; time consistent income taxation; migration; education;

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Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August. [Downloadable!] (restricted)
  2. Jeremy Edwards & Michael Keen, 1994. "Tax Competition and Leviathan," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich.
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  3. Kydland, Finn E. & Prescott, Edward C., 1980. "Dynamic optimal taxation, rational expectations and optimal control," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 79-91, May. [Downloadable!] (restricted)
  4. Panu Poutvaara & Vesa Kanniainen, 2000. "Why Invest in Your Neighbor? Social Contract on Educational Investment," International Tax and Public Finance, Springer, vol. 7(4), pages 547-562, August. [Downloadable!] (restricted)
  5. Eaton, Jonathan & Rosen, Harvey S, 1980. "Taxation, Human Capital, and Uncertainty," American Economic Review, American Economic Association, vol. 70(4), pages 705-15, September. [Downloadable!] (restricted)
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  6. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March. [Downloadable!] (restricted)
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  7. Konrad, Kai A., 2001. "Privacy and time-consistent optimal labor income taxation," Journal of Public Economics, Elsevier, vol. 79(3), pages 503-519, March. [Downloadable!] (restricted)
  8. Andersson, Fredrik & Konrad, Kai A, 2001. "Globalization and Human Capital Formation," CEPR Discussion Papers 2657, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Boadway, Robin & Marceau, Nicolas & Marchand, Maurice, 1996. "Investment in Education and the Time Inconsistency of Redistributive Tax Policy," Economica, London School of Economics and Political Science, vol. 63(250), pages 171-89, May. [Downloadable!] (restricted)
  10. Kehoe, Patrick J, 1989. "Policy Cooperation among Benevolent Governments May Be Undesirable," Review of Economic Studies, Blackwell Publishing, vol. 56(2), pages 289-96, April. [Downloadable!] (restricted)
  11. Andersson, Fredrik & Konrad, Kai A., 2001. "Human Capital Investment and Globalization in Extortionary States," IZA Discussion Papers 239, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  12. Boadway, Robin & Marchand, Maurice, 1995. "The Use of Public Expenditures for Redistributive Purposes," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 45-59, January. [Downloadable!] (restricted)
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  13. Gradstein, Mark, 1999. "An Economic Rationale for Public Education: The Value of Commitment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  14. Poutvaara, Panu, 1999. "Federation's alternative tax constitutions and risky education," ZEW Discussion Papers 99-42, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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