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Intergenerational Complementarities in Education and the Relationship between Growth and Volatility

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  • Theodore Palivos
  • Dimitrios Varvarigos

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Abstract

We construct an overlapping generations model in which parents vote on the tax rate that determines publicly provided education and offspring choose their effort in learning activities. The technology governing the accumulation of human capital allows these decisions to be strategic complements. In the presence of coordination failure, indeterminacy and, possibly, growth cycles emerge. In the absence of coordination failure, the economy moves along a uniquely determined balanced growth path. We argue that such structural differences can account for the negative correlation between volatility and growth.

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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 09/8.

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Date of creation: Mar 2009
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Handle: RePEc:lec:leecon:09/8

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Keywords: Human Capital; Economic Growth; Volatility;

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References

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  1. de la Croix, David & Doepke, Matthias, 2007. "To Segregate or to Integrate: Education Politics and Democracy," IZA Discussion Papers 2967, Institute for the Study of Labor (IZA).
  2. Santanu Chatterjee & Paola Giuliano & Stephen J. Turnovsky, 2004. "Capital Income Taxes and Growth in a Stochastic Economy: A Numerical Analysis of the Role of Risk Aversion and Intertemporal Substitution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(2), pages 277-310, 05.
  3. Agell, Jonas & Ohlsson, Henry & Thoursie, Peter Skogman, 2006. "Growth effects of government expenditure and taxation in rich countries: A comment," European Economic Review, Elsevier, Elsevier, vol. 50(1), pages 211-218, January.
  4. Ceroni, Carlotta Berti, 2001. "Poverty Traps and Human Capital Accumulation," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 68(270), pages 203-19, May.
  5. Jeffrey P. Cohen & Catherine J. Morrison Paul, 2004. "Public Infrastructure Investment, Interstate Spatial Spillovers, and Manufacturing Costs," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 551-560, May.
  6. Jacques Poot, 2000. "A Synthesis of Empirical Research on the Impact of Government onLong-Run Growth," Growth and Change, Gatton College of Business and Economics, University of Kentucky, Gatton College of Business and Economics, University of Kentucky, vol. 31(4), pages 516-546.
  7. Quah, Danny T, 1997. " Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," Journal of Economic Growth, Springer, Springer, vol. 2(1), pages 27-59, March.
  8. Alfredo M. Pereira, 2000. "Is All Public Capital Created Equal?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 513-518, August.
  9. Bania, Neil & Gray, Jo Anna & Stone, Joe A., 2007. "Growth, Taxes, and Government Expenditures: Growth Hills for U.S. States," National Tax Journal, National Tax Association, vol. 60(2), pages 193-204, June.
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Cited by:
  1. Theodore Palivos & Dimitrios Varvarigos, 2010. "Education and growth: A simple model with complicated dynamics," International Journal of Economic Theory, The International Society for Economic Theory, The International Society for Economic Theory, vol. 6(4), pages 367-384.
  2. Theodore Palivos & Dimitrios Varvarigos, 2013. "Intergenerational Complementarities in Education, Endogenous Public Policy, and the Relation Between Growth and Volatility," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(2), pages 249-272, 04.

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