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The Expansion of Higher Education and Time-Consistent Taxation

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Author Info
Panu Poutvaara () (University of Helsinki and IZA)

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Abstract

This paper analyzes educational choices and political support for subsidies to higher education in the presence of a time-consistency problem in income redistribution. There may be political support for so generous subsidization that it motivates the median voter to obtain higher education. As a result of increasing own income, the median voter prefers in the future lower taxes than without higher education. Therefore, the expansion of participation in higher education during the second half of the 20th century may have partly been driven by the aim to limit the political support for overly generous income redistribution.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3023.

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Length: 15 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:iza:izadps:dp3023

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Related research
Keywords: education; time-consistency problem; voting; subsidies to education;

Find related papers by JEL classification:
H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
I22 - Health, Education, and Welfare - - Education - - - Educational Finance
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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References listed on IDEAS
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  1. Creedy, John & Francois, Patrick, 1990. "Financing higher education and majority voting," Journal of Public Economics, Elsevier, vol. 43(2), pages 181-200, November. [Downloadable!] (restricted)
  2. Fredrik Andersson & Kai Konrad, 2003. "Globalization and Risky Human-Capital Investment," Asia-Pacific Financial Markets, Springer, vol. 10(3), pages 211-228, May. [Downloadable!] (restricted)
    Other versions:
  3. Justman, Moshe & Thisse, Jacques-Francois, 1997. "Implications of the mobility of skilled labor for local public funding of higher education," Economics Letters, Elsevier, vol. 55(3), pages 409-412, September. [Downloadable!] (restricted)
  4. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March. [Downloadable!] (restricted)
    Other versions:
  5. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2001. "The Survival of the Welfare State," Economics Working Papers 603, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  6. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-18, July. [Downloadable!] (restricted)
  7. Konrad, Kai A, 1995. "Social Security and Strategic Inter-vivos Transfers of Social Capital," Journal of Population Economics, Springer, vol. 8(3), pages 315-26, August.
  8. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October. [Downloadable!] (restricted)
  9. Oded Galor & Omer Moav, 2006. "Das Human-Kapital: A Theory of the Demise of the Class Structure," Review of Economic Studies, Blackwell Publishing, vol. 73(1), pages 85-117, 01. [Downloadable!] (restricted)
    Other versions:
  10. Glazer, Amihai, 1989. "Politics and the Choice of Durability," American Economic Review, American Economic Association, vol. 79(5), pages 1207-13, December. [Downloadable!] (restricted)
  11. Panu Poutvaara, 2003. "Educating Europe," Public Economics 0302008, EconWPA. [Downloadable!]
    Other versions:
  12. 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)
  13. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June. [Downloadable!] (restricted)
  14. 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)
  15. David E. Wildasin, 2000. "Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition," American Economic Review, American Economic Association, vol. 90(1), pages 73-95, March. [Downloadable!] (restricted)
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