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Human Capital, Public Debt, and Economic Growth: A Political Economy Analysis

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  • Tetsuo Ono

    (Graduate School of Economics, Osaka University)

  • Yuki Uchida

    (Graduate School of Economics, Osaka University)

Abstract

This study considers public education policy and its impact on growth and wel- fare across generations. In particular, the study compares two fiscal perspectives-tax finance and debt finance|and shows that in a competitive equilibrium context, the growth and utility in the debt-finance case could be higher than those in the tax-finance case in the long run. However, the opposite occurs when the policy is shaped by politics. When the degree of parents' altruism is low, they choose debt finance in their voting, despite its long-run worse performance because a current generation can pass the cost of debt repayment to future generations.

Suggested Citation

  • Tetsuo Ono & Yuki Uchida, 2016. "Human Capital, Public Debt, and Economic Growth: A Political Economy Analysis," Discussion Papers in Economics and Business 16-01-Rev., Osaka University, Graduate School of Economics, revised Aug 2016.
  • Handle: RePEc:osk:wpaper:1601r
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    Cited by:

    1. Uchida, Yuki & Ono, Tetsuo, 2021. "Political economy of taxation, debt ceilings, and growth," European Journal of Political Economy, Elsevier, vol. 68(C).
    2. Arawatari, Ryo & Ono, Tetsuo, 2021. "Public debt rule breaking by time-inconsistent voters," European Journal of Political Economy, Elsevier, vol. 69(C).
    3. Uchida, Yuki & Ono, Tetsuo, 2020. "Generational Distribution of Fiscal Burdens: A Positive Analysis," MPRA Paper 102826, University Library of Munich, Germany.
    4. Takumi Motoyama, 2019. "Sustainability of public debt under physical and human capital accumulation in an overlapping generations model," Journal of Economics, Springer, vol. 127(1), pages 19-45, June.
    5. Mutiu Abimbola Oyinlola and Abdulfatai Adekunle Adedeji, 2020. "Enhancing Economic Growth Impact of Financial Development and Human Capital through Capital Flows in Sub-Saharan Africa," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(2), pages 95-114, June.

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    More about this item

    Keywords

    Economic growth; Human capital; Public debt; Political equilib- rium;
    All these keywords.

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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