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Two-sided intergenerational transfer policy and economic development: A politico-economic approach

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  • Naito, Katsuyuki

Abstract

We 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.

Suggested Citation

  • Naito, Katsuyuki, 2012. "Two-sided intergenerational transfer policy and economic development: A politico-economic approach," Journal of Economic Dynamics and Control, Elsevier, vol. 36(9), pages 1340-1348.
  • Handle: RePEc:eee:dyncon:v:36:y:2012:i:9:p:1340-1348
    DOI: 10.1016/j.jedc.2012.02.008
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    References listed on IDEAS

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    1. Panu Poutvaara, 2006. "On the political economy of social security and public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 345-365, June.
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    9. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
    10. Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January.
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    12. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
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    Cited by:

    1. Tetsuo Ono & Yuki Uchida, 2016. "Human Capital, Public Debt, and Economic Growth: A Political Economy Analysis," Discussion Papers in Economics and Business 16-01-Rev.3, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Oct 2017.
    2. Ono, Tetsuo & Uchida, Yuki, 2016. "Pensions, education, and growth: A positive analysis," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 127-143.
    3. Katsuyuki Naito & Keigo Nishida, 2017. "Multistage public education, voting, and income distribution," Journal of Economics, Springer, vol. 120(1), pages 65-78, January.
    4. Tetsuo Ono, 2015. "Public education and social security: a political economy approach," Economics of Governance, Springer, vol. 16(1), pages 1-25, February.
    5. Bishnu, Monisankar & Wang, Min, 2017. "The political intergenerational welfare state," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 93-110.
    6. Monisankar Bishnu & Min Wang, 2013. "The Political intergenerational welfare state: A Unified framework," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 13-08, Indian Statistical Institute, New Delhi, India.
    7. Tetsuo Ono, 2014. "Economic Growth and the Politics of Intergenerational Redistribution," Discussion Papers in Economics and Business 14-17, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    8. Torben M. Andersen & Joydeep Bhattacharya, 2013. "The Intergenerational Welfare State," CESifo Working Paper Series 4359, CESifo Group Munich.
    9. repec:eee:hapoch:v1_381 is not listed on IDEAS

    More about this item

    Keywords

    Public education; Social security; Markov perfect equilibrium; Income inequality; Economic development;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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