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Political rivalry effects on human capital accumulation and inequality: a New Political Economy approach

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  • Elena Sochirca

    () (FEP)

  • Oscar Afonso

    () (FEP)

  • Sandra Silva

    () (FEP)

Abstract

We propose an endogenous growth model with elements of new political economy in order to study the effects of political institutions and political rivalry on human capital accumulation and income inequality. Relating to the increasing literature on the relationship between income redistribution, inequality and growth, and on the political economy of growth, our model shows that (i) non-distortionary redistribution via public education equalizes income levels and increases human capital accumulation; (ii) political rivalry produces negative outcomes in all dimensions of the considered economic interactions. In particular, we find that occurring episodes of political rivalry reduce human capital accumulation through their negative impact on public investments in education, workers' wages and individual learning choice, and increase income inequality. As regards the role of political institutions, our analysis suggests that the elasticities of human capital accumulation with respect to public and private investments have crucial implications for public policies and require particular attention to the political rivalry effects.

Suggested Citation

  • Elena Sochirca & Oscar Afonso & Sandra Silva, 2012. "Political rivalry effects on human capital accumulation and inequality: a New Political Economy approach," FEP Working Papers 466, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:466
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Elena Sochirca & Francisco José Veiga, 2017. "Measuring political rivalry and estimating its effect on economic growth," NIPE Working Papers 04/2017, NIPE - Universidade do Minho.
    2. Elena Sochirca & Pedro Cunha Neves, 2018. "Optimal policies, middle class development and human capital accumulation under elite rivalry," CEFAGE-UE Working Papers 2018_04, University of Evora, CEFAGE-UE (Portugal).
    3. Abel L. Costa Fernandes & Paulo R. Mota, 2012. "Triffin’s Dilemma Again and the Efficient Level of U.S. Government Debt," FEP Working Papers 469, Universidade do Porto, Faculdade de Economia do Porto.
    4. Elena Sochirca & Óscar Afonso & Sandra Silva, 2013. "Effects of political rivalry on public educational investments and income inequality: evidence from empirical data," CEF.UP Working Papers 1304, Universidade do Porto, Faculdade de Economia do Porto.
    5. Elena Sochirca & Pedro Cunha Neves, 0. "Optimal policies, middle class development and human capital accumulation under elite rivalry," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 0, pages 1-18.
    6. Sochirca, Elena & Afonso, Óscar & Silva, Sandra Tavares & Neves, Pedro Cunha, 2016. "Effects of political rivalry on public investments in education and income inequality," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 372-396.
    7. Elena Sochirca & Francisco José Veiga, 2018. "Key determinants of elite rivalry: theoretical insights and empirical evidence," NIPE Working Papers 02/2018, NIPE - Universidade do Minho.
    8. Ori Zax, 2020. "Human capital acquisition as a competitive response to the promotion distortion," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 496-509, July.
    9. Elena Sochirca & Pedro Cunha Neves, 2018. "Optimal policies, middle class development and human capital accumulation under elite rivalry," NIPE Working Papers 16/2018, NIPE - Universidade do Minho.

    More about this item

    Keywords

    political rivalry; institutions; human capital accumulation; public education; inequality; efficient redistribution; economic growth.;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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