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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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  1. Robin Boadway & Nicolas Marceau & Maurice Marchand, 1992. "Investment in Education and the Time Inconsistency of Redistributive Tax Policy," Working Papers 860, Queen's University, Department of Economics.
  2. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
  3. Andersson, Fredrik & Konrad, Kai A., 2002. "Human capital investment and globalization in extortionary states
    [Humankapitalinvestitionen und Globalisierung in Ausbeutungsstaaten]
    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-01, Social Science Research Center Berlin (WZB).
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  8. Mark Gradstein, 1999. "An Economic Rationale for Public Education: The Value of Commitment," CESifo Working Paper Series 209, CESifo Group Munich.
  9. Andersson, Fredrik & Konrad, Kai A., 2001. "Globalization and Human Capital Formation," CEPR Discussion Papers 2657, C.E.P.R. Discussion Papers.
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  14. Poutvaara, Panu, 1999. "Federation's alternative tax constitutions and risky education," ZEW Discussion Papers 99-42, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  15. Moshe Justman & Jacques-Francois Thisse, 2000. "Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 247-258, May.
  16. Martin C. McGuire & Mancur Olson Jr., 1996. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 72-96, March.
  17. Hans-Werner Sinn, 1995. "Social Insurance, Incentives, and Risk Taking," NBER Working Papers 5335, National Bureau of Economic Research, Inc.
  18. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
  19. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
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