IDEAS home Printed from https://ideas.repec.org/p/osk/wpaper/1805.html
   My bibliography  Save this paper

Capital Income Taxation, Economic Growth, and the Politics of Public Education

Author

Listed:
  • Tetsuo Ono

    (Graduate School of Economics, Osaka University)

  • Yuki Uchida

    (Faculty of Economics, Seikei University)

Abstract

This study considers the politics of public education and its impacts on economic growth and welfare across generations. Public education is funded by taxing the labor income of the working generation and capital income of the retired. We employ probabilistic voting to demonstrate the politics of taxes and expenditure and show that aging results in a shift of the tax burden from the old to the young and a slowdown of economic growth. We then consider three alternative constraints that limit the choice of taxes and/or expenditure: a minimum level of public education expenditure, an upper limit of the capital income tax rate, and a combination of the two. These constraints all create a trade-off between current and future generations in terms of welfare.

Suggested Citation

  • Tetsuo Ono & Yuki Uchida, 2018. "Capital Income Taxation, Economic Growth, and the Politics of Public Education," Discussion Papers in Economics and Business 18-05, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1805
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gradstein, Mark & Kaganovich, Michael, 2004. "Aging population and education finance," Journal of Public Economics, Elsevier, vol. 88(12), pages 2469-2485, December.
    2. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    3. Francesco Lancia & Alessia Russo, 2016. "Public Education and Pensions in Democracy: A Political Economy Theory," Journal of the European Economic Association, European Economic Association, vol. 14(5), pages 1038-1073.
    4. Gonzalez-Eiras, Martín & Niepelt, Dirk, 2012. "Ageing, government budgets, retirement, and growth," European Economic Review, Elsevier, vol. 56(1), pages 97-115.
    5. Cattaneo, M. Alejandra & Wolter, Stefan C., 2009. "Are the elderly a threat to educational expenditures?," European Journal of Political Economy, Elsevier, vol. 25(2), pages 225-236, June.
    6. Gerhard Glomm & B. Ravikumar, 2001. "Human capital accumulation and endogenous public expenditures," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 807-826, August.
    7. Michael Kaganovich & Volker Meier, 2012. "Social Security Systems, Human Capital, and Growth in a Small Open Economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(4), pages 573-600, August.
    8. Gonzalez-Eiras, Marti­n & Niepelt, Dirk, 2008. "The future of social security," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 197-218, March.
    9. Bishnu, Monisankar, 2013. "Linking consumption externalities with optimal accumulation of human and physical capital and intergenerational transfers," Journal of Economic Theory, Elsevier, vol. 148(2), pages 720-742.
    10. Lambrecht, Stephane & Michel, Philippe & Vidal, Jean-Pierre, 2005. "Public pensions and growth," European Economic Review, Elsevier, vol. 49(5), pages 1261-1281, July.
    11. Bishnu, Monisankar & Wang, Min, 2017. "The political intergenerational welfare state," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 93-110.
    12. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2012. "Rotten Parents and Disciplined Children: A Politico‐Economic Theory of Public Expenditure and Debt," Econometrica, Econometric Society, vol. 80(6), pages 2785-2803, November.
    13. Gerhard Glomm, 2004. "Inequality, Majority Voting And The Redistributive Effects Of Public Education Funding," Pacific Economic Review, Wiley Blackwell, vol. 9(2), pages 93-101, June.
    14. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
    15. Glomm, Gerhard & Ravikumar, B., 2003. "Public education and income inequality," European Journal of Political Economy, Elsevier, vol. 19(2), pages 289-300, June.
    16. Kunze, Lars, 2014. "Life expectancy and economic growth," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 54-65.
    17. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
    18. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
    19. Ono, Tetsuo & Uchida, Yuki, 2016. "Pensions, education, and growth: A positive analysis," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 127-143.
    20. Naito, Katsuyuki, 2012. "Two-sided intergenerational transfer policy and economic development: A politico-economic approach," Journal of Economic Dynamics and Control, Elsevier, vol. 36(9), pages 1340-1348.
    21. Gerhard Glomm & B. Ravikumar, 1998. "Opting out of publicly provided services: A majority voting result," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(2), pages 187-199.
    22. Renstrom, Thomas I, 1996. "Endogenous Taxation: An Overlapping Generations Approach," Economic Journal, Royal Economic Society, vol. 106(435), pages 471-482, March.
    23. Andrew Atkeson & V. V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 23(Sum), pages 3-17.
    24. Soares, Jorge, 2003. "Self-interest and public funding of education," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 703-727, March.
    25. Gradstein, Mark, 2000. "An economic rationale for public education: The value of commitment," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 463-474, April.
    26. Jorge Soares, 2006. "A dynamic general equilibrium analysis of the political economy of public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 367-389, June.
    27. Assaf Razin & Efraim Sadka & Phillip Swagel, 2004. "Capital income taxation under majority voting with aging population," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(3), pages 476-495, September.
    28. Dolmas, Jim & Huffman, Gregory W., 1997. "The political economy of endogenous taxation and redistribution," Economics Letters, Elsevier, vol. 56(2), pages 223-227, October.
    29. Soares, Jorge, 2005. "Public education reform: Community or national funding of education?," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 669-697, April.
    30. Jorge Soares, "undated". "The Political Economy of Public Education," Working Papers 106, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    31. Glomm, Gerhard & Kaganovich, Michael, 2008. "Social security, public education and the growth-inequality relationship," European Economic Review, Elsevier, vol. 52(6), pages 1009-1034, August.
    32. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    33. Buly A. Cardak, 2004. "Education Choice, Endogenous Growth and Income Distribution," Economica, London School of Economics and Political Science, vol. 71, pages 57-81, February.
    34. Xavier Mateos-Planas, 2010. "Demographics and the Politics of Capital Taxation in a Life-Cycle Economy," American Economic Review, American Economic Association, vol. 100(1), pages 337-363, March.
    35. Kaganovich, Michael & Zilcha, Itzhak, 2012. "Pay-as-you-go or funded social security? A general equilibrium comparison," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 455-467.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Capital Income Taxation, Economic Growth, and the Politics of Public Education
      by Christian Zimmermann in NEP-DGE blog on 2018-06-15 11:57:20

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. Uchida, Yuki & Ono, Tetsuo, 2021. "Generational conflict and education politics: Implications for growth and welfare," Journal of Macroeconomics, Elsevier, vol. 69(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Uchida, Yuki & Ono, Tetsuo, 2021. "Generational conflict and education politics: Implications for growth and welfare," Journal of Macroeconomics, Elsevier, vol. 69(C).
    2. Uchida, Yuki & Ono, Tetsuo, 2021. "Political economy of taxation, debt ceilings, and growth," European Journal of Political Economy, Elsevier, vol. 68(C).
    3. Ono, Tetsuo & Uchida, Yuki, 2018. "Human capital, public debt, and economic growth: A political economy analysis," Journal of Macroeconomics, Elsevier, vol. 57(C), pages 1-14.
    4. Ono, Tetsuo & Uchida, Yuki, 2016. "Pensions, education, and growth: A positive analysis," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 127-143.
    5. Tetsuo Ono, 2015. "Public education and social security: a political economy approach," Economics of Governance, Springer, vol. 16(1), pages 1-25, February.
    6. Uchida, Yuki & Ono, Tetsuo, 2022. "Politics of Public Education and Pension Reform with Endogenous Fertility," MPRA Paper 114543, University Library of Munich, Germany.
    7. Uchida, Yuki & Ono, Tetsuo, 2021. "Borrowing to finance public investment: a politico-economic analysis of fiscal rules," MPRA Paper 115844, University Library of Munich, Germany, revised 31 Dec 2022.
    8. Tetsuo Ono, 2014. "Economic Growth and the Politics of Intergenerational Redistribution," Discussion Papers in Economics and Business 14-17-Rev., Osaka University, Graduate School of Economics, revised Sep 2015.
    9. Bishnu, Monisankar & Wang, Min, 2017. "The political intergenerational welfare state," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 93-110.
    10. Casamatta, G. & Batté, L., 2016. "The Political Economy of Population Aging," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 381-444, Elsevier.
    11. Yuki Uchida & Tetsuo Ono, 2024. "Generational Distribution of Fiscal Burdens: A Positive Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 393-430, February.
    12. Georges Casamatta & L. Batté, 2016. "The Political Economy of Population Aging," Post-Print hal-02520521, HAL.
    13. Tetsuo Ono, 2017. "Aging, Pensions, and Growth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 73(2), pages 163-189, June.
    14. Daniel Montolio & Amedeo Piolatto & Luca Salvadori, 2022. "Financing public education when agents have retirement concerns," Economic Inquiry, Western Economic Association International, vol. 60(4), pages 1559-1580, October.
    15. Monisankar Bishnu & Min Wang, 2013. "The Political intergenerational welfare state: A Unified framework," Discussion Papers 13-08, Indian Statistical Institute, Delhi.
    16. Michael Kaganovich & Volker Meier, 2012. "Social Security Systems, Human Capital, and Growth in a Small Open Economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(4), pages 573-600, August.
    17. Ono, Tetsuo, 2019. "Growth, Unemployment, And Fiscal Policy: A Political Economy Analysis," Macroeconomic Dynamics, Cambridge University Press, vol. 23(8), pages 3099-3139, December.
    18. Nikos Benos, 2005. "Education Systems, Growth and Welfare," University of Cyprus Working Papers in Economics 5-2005, University of Cyprus Department of Economics.
    19. Yuki Uchida & Tetsuo Ono, 2020. "Inequality and education choice," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 980-1018, August.
    20. Tetsuo Ono, 2014. "Intergenerational Politics, Government Debt and Economic Growth," Discussion Papers in Economics and Business 14-23, Osaka University, Graduate School of Economics.

    More about this item

    Keywords

    Public education; Economic growth; Capital income tax; Political equilibrium;
    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:osk:wpaper:1805. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: The Economic Society of Osaka University (email available below). General contact details of provider: https://edirc.repec.org/data/feosujp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.