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Human Capital Investment and Globalization in Extortionary States

  • Andersson, Fredrik

    ()

    (Lund University)

  • Konrad, Kai A.

    ()

    (Max Planck Institute for Tax Law and Public Finance)

This paper considers education investment and public education subsidies in closed and open economies with an extortionary government. The extortionary government in a closed economy has incentives to subsidize education 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 fully mobile. Extortionary governments’ incentives for education subsidies vanish and they even have an incentive to prevent individuals from mobility increasing education investment. Tax competition therefore reduces hold-up problems of time consistent extortionary taxation, but also introduces incentives that reduce workers’ utility.

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File URL: http://ftp.iza.org/dp239.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 239.

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Length: 29 pages
Date of creation: Jan 2001
Date of revision:
Publication status: published in: Journal of Public Economics, 2003, 87 (7-8), 1539-1555
Handle: RePEc:iza:izadps:dp239
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  6. Andersson, Fredrik & Konrad, Kai A., 2003. "Human capital investment and globalization in extortionary states," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1539-1555, August.
  7. Boadway, R. & Marceau, N. & Marchand, M., . "Investment in education and the time inconsistency of redistributive tax policy," CORE Discussion Papers RP -1219, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  17. Kehoe, Patrick J, 1989. "Policy Cooperation among Benevolent Governments May Be Undesirable," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 289-96, April.
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