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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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  2. Kydland, Finn E. & Prescott, Edward C., 1980. "Dynamic optimal taxation, rational expectations and optimal control," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 79-91, May.
  3. Andersson, Frederik & Konrad, Kai A., 2001. "Globalization and human capital formation
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  7. repec:cup:cbooks:9780521027922 is not listed on IDEAS
  8. Fredrik Andersson & Kai A. Konrad, 2002. "Human Capital Investment and Globalization in Extortionary States," CESifo Working Paper Series 703, CESifo Group Munich.
  9. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
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  17. 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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