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Intergenerational complementarities in education, endogenous public policy, and the relation between growth and volatility

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  • Palivos, Theodore
  • Varvarigos, Dimitrios

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 volatility emerge. This indeterminacy can be eliminated by an institutional mechanism that commits to a minimum level of public education provision. Given that, in the latter case, 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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31343.

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Date of creation: 16 Apr 2011
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Handle: RePEc:pra:mprapa:31343

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Keywords: Human Capital; Intergenerational Complementarities; Economic Growth; Endogenous Taxation; Volatility;

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  1. Agell, Jonas & Ohlsson, Henry & Thoursie, Peter Skogman, 2006. "Growth effects of government expenditure and taxation in rich countries: A comment," European Economic Review, Elsevier, vol. 50(1), pages 211-218, January.
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Cited by:
  1. Tetsuo Ono, 2013. "Public Education and Social Security: A Political Economy Approach," Discussion Papers in Economics and Business 13-06-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  2. Tetsuo Ono, 2013. "Public Education and Social Security: A Political Economy Approach," Discussion Papers in Economics and Business 13-06, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

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