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Human Capital Investment and Globalization in Extortionary States

  • Fredrik Andersson
  • Kai A. Konrad

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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2002/wp-cesifo-2002-04/cesifo_wp703.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 703.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_703
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  1. Hans-Werner Sinn, 1996. "Social insurance, incentives and risk taking," International Tax and Public Finance, Springer, vol. 3(3), pages 259-280, July.
  2. Boadway, R. & Marchand, M., 1990. "The use of public expenditures for distributive purposes," CORE Discussion Papers 1990066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  7. Boadway, Robin & Marceau, Nicolas & Marchand, Maurice, 1996. "Investment in Education and the Time Inconsistency of Redistributive Tax Policy," Economica, London School of Economics and Political Science, vol. 63(250), pages 171-89, May.
  8. Andersson, Fredrik & Konrad, Kai A., 2001. "Globalization and Human Capital Formation," IZA Discussion Papers 245, Institute for the Study of Labor (IZA).
  9. Andersson, Fredrik & Konrad, Kai A., 2001. "Human Capital Investment and Globalization in Extortionary States," IZA Discussion Papers 239, Institute for the Study of Labor (IZA).
  10. Mark Gradstein, 1999. "An Economic Rationale for Public Education: The Value of Commitment," CESifo Working Paper Series 209, CESifo Group Munich.
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  12. 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.
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  20. repec:cup:cbooks:9780521027922 is not listed on IDEAS
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