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Efficient redistribution policy: an analysis focused on the quality of institutions and public education

Author

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  • Elena Sochirca

    () (Faculdade de Economia, Universidade do Porto)

  • Sandra Tavares Silva

    () (CEF.UP, Faculdade de Economia, Universidade do Porto)

Abstract

In this work we intend to study how the quality of the institutional factor may influence the efficiency of redistribution policy specifically associated with human capital accumulation. We develop a conceptual discussion building on the importance of income redistribution for economic growth and the key role of political institutions in securing growth-enhancing redistribution policies. We introduce endogenous growth theory elements into our analysis by considering as a fundamental source of economic growth human capital accumulation, motivated by tax-financed education secured through efficient redistribution policies. We outline crucial insights on the underlying mechanisms, emphasizing however that extensive research on the subject is undoubtedly still required. In particular, we identify the main factors negatively affecting the decisive role of political institutions and, consequently, distorting efficient redistribution policy. We then define a political-economic equilibrium as a combination of intermediately strong state and efficient control-rights institutions, implying simultaneous protection from expropriation and implementation of efficient redistribution policy, conducive to sustained economic growth.

Suggested Citation

  • Elena Sochirca & Sandra Tavares Silva, 2011. "Efficient redistribution policy: an analysis focused on the quality of institutions and public education," FEP Working Papers 406, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:406
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    Keywords

    redistribution policy; human capital; institutions; taxation; public education; economic growth;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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