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Human capital investment and globalization in extortionary states

  • Andersson, Fredrik
  • Konrad, Kai A.

This paper considers education investment and public education policy in closed and open economies with an extortionary government. The extortionary government in a closed economy chooses an education policy 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 mobile. Extortionary governments. incentives for a policy that stimulates higher private education efforts vanish; instead they have incentives to prevent individuals from mobility-increasing education investment. Tax competition therefore reduces hold-up problems of time-consistent extortionary taxation, but introduces other distortions that reduce workers. utility.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 87 (2003)
Issue (Month): 7-8 (August)
Pages: 1539-1555

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Handle: RePEc:eee:pubeco:v:87:y:2003:i:7-8:p:1539-1555
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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