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The Expansion of Higher Education and Time-Consistent Taxation

  • Poutvaara, Panu


    (University of Munich)

This paper analyzes educational choices and political support for subsidies to higher education in the presence of a time-consistency problem in income redistribution. There may be political support for so generous subsidization that it motivates the median voter to obtain higher education. As a result of increasing own income, the median voter prefers in the future lower taxes than without higher education. Therefore, the expansion of participation in higher education during the second half of the 20th century may have partly been driven by the aim to limit the political support for overly generous income redistribution.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3023.

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Length: 15 pages
Date of creation: Sep 2007
Date of revision:
Publication status: published in: European Journal of Political Economy, 2011, 27 (2), 257-267
Handle: RePEc:iza:izadps:dp3023
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  1. 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.
  2. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2003. "The Survival of the Welfare State," American Economic Review, American Economic Association, vol. 93(1), pages 87-112, March.
  3. Guido Tabellini & Alberto Alesina, 1988. "Voting on the Budget Deficit," UCLA Economics Working Papers 539, UCLA Department of Economics.
  4. Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
  5. Bassett, William F. & Burkett, John P. & Putterman, Louis, 1999. "Income distribution, government transfers, and the problem of unequal influence," European Journal of Political Economy, Elsevier, vol. 15(2), pages 207-228, June.
  6. 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).
  7. Galor, Oded & Moav, Omer, 2001. "Das Human Kapital," CEPR Discussion Papers 2701, C.E.P.R. Discussion Papers.
  8. Claudio Thum & Silke Uebelmesser, 2001. "Mobility and the Role of Education as a Commitment Device," CESifo Working Paper Series 450, CESifo Group Munich.
  9. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  10. Oded Galor & Omer Moav, 2006. "Das Human-Kapital: A Theory of the Demise of the Class Structure," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 85-117.
  11. Glazer, Amihai, 1989. "Politics and the Choice of Durability," American Economic Review, American Economic Association, vol. 79(5), pages 1207-13, December.
  12. Poutvaara, Panu, 2004. "Educating Europe: Should Public Education be Financed with Graduate Taxes or Income-contingent Loans?," Munich Reprints in Economics 19296, University of Munich, Department of Economics.
  13. Justman, Moshe & Thisse, Jacques-Francois, 1997. "Implications of the mobility of skilled labor for local public funding of higher education," Economics Letters, Elsevier, vol. 55(3), pages 409-412, September.
  14. Kristov, Lorenzo & Lindert, Peter & McClelland, Robert, 1992. "Pressure groups and redistribution," Journal of Public Economics, Elsevier, vol. 48(2), pages 135-163, July.
  15. Poutvaara, Panu, 2004. "On the Political Economy of Social Security and Public Education," IZA Discussion Papers 1408, Institute for the Study of Labor (IZA).
  16. Di Gioacchino, Debora & Sabani, Laura, 2009. "Education policy and inequality: A political economy approach," European Journal of Political Economy, Elsevier, vol. 25(4), pages 463-478, December.
  17. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  18. Moshe Justman & Jacques-Francois Thisse, 2000. "Local Public Funding of Higher Education When Skilled Labor is Imperfectly Mobile," International Tax and Public Finance, Springer, vol. 7(3), pages 247-258, May.
  19. Alexander Haupt & Eckhard Janeba, 2009. "Education, redistribution and the threat of brain drain," International Tax and Public Finance, Springer, vol. 16(1), pages 1-24, February.
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  22. Andersson, Fredrik & Konrad, Kai A, 2003. "Globalization and Risky Human-Capital Investment," International Tax and Public Finance, Springer, vol. 10(3), pages 211-28, May.
  23. repec:oup:restud:v:56:y:1989:i:2:p:289-96 is not listed on IDEAS
  24. Grossmann, Volker, 2003. "Income inequality, voting over the size of public consumption, and growth," European Journal of Political Economy, Elsevier, vol. 19(2), pages 265-287, June.
  25. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-18, July.
  26. Konrad, Kai A, 1995. "Social Security and Strategic Inter-vivos Transfers of Social Capital," Journal of Population Economics, Springer, vol. 8(3), pages 315-26, August.
  27. Panu Poutvaara, 2004. "Educating Europe," CESifo Working Paper Series 1114, CESifo Group Munich.
  28. Dennis Mueller & Peter Murrell, 1986. "Interest groups and the size of government," Public Choice, Springer, vol. 48(2), pages 125-145, January.
  29. Panu Poutvaara, 2008. "Public and Private Education in an Integrated Europe: Studying to Migrate and Teaching to Stay?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(3), pages 591-608, 09.
  30. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
  31. David E. Wildasin, 2000. "Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition," American Economic Review, American Economic Association, vol. 90(1), pages 73-95, March.
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