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Capital Mobility

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Abstract

This paper considers the effect of fiscal and financial policy on economic growth in open and closed economies, when human capital formation by young households is constrained by the illiquidity of human wealth. Both endogenous and exogenous growth versions of the basic OLG model are analyzed. We find that intergenerational redistribution policies that discourage physical and capital formation may encourage human capital formation. Despite common technologies and perfect international mobility financial capital, the non-tradedness of human capital and the illiquidity of human wealth makes for persistent differences in productivity growth rates (in the endogenous growth version of the model) or in their levels (in the exogenous growth version). We also consider the productivity growth (or level) effects of public spending on education and of the distortionary taxation of financial asset income.

Suggested Citation

  • W.H. Buiter & K Kletzer, 1995. "Capital Mobility," CEP Discussion Papers dp0245, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0245
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    Cited by:

    1. Philippe Monfort & David de la Croix, 2000. "Education funding and regional convergence," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(3), pages 403-424.
    2. Simone Valente, 2005. "Tax Policy and Human Capital Formation with Public Investment in Education," Journal of Economics, Springer, vol. 86(3), pages 229-258, December.
    3. David Croix & Philippe Michel, 2007. "Education and growth with endogenous debt constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(3), pages 509-530, December.
    4. F. Heylen & L. Pozzi & J. Vandewege, 2004. "Inflation crises, human capital formation and growth," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/260, Ghent University, Faculty of Economics and Business Administration.
    5. Erasmo Papagni, 2008. "The Long-run Effects of Household Liquidity Constraints and Taxation on Fertility, Education, Saving, and Growth," Discussion Papers 11_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    6. F. Heylen & A. Schollaert & G. Everaert & L. Pozzi, 2003. "Inflation and human capital formation : theory and panel data evidence," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/174, Ghent University, Faculty of Economics and Business Administration.
    7. Thomas Krichel, 1998. "Growing at Different Rates," School of Economics Discussion Papers 9801, School of Economics, University of Surrey.

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