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Two-sided Intergenerational Transfer Policy and Economic Development: A Politico-economic Approach

  • Naito, Katsuyuki

We consider an overlapping generations model with public education and social security where the overall size of these policies is determined in a repeated voting game. We investigate the interaction between the politically determined policies and economic development in a Markov perfect equilibrium. The following results are obtained. First, the level of human capital determines whether these policies are sustained in the Markov perfect equilibrium. Second, if the level of initial human capital is sufficiently high, human capital grows forever. In contrast, if the level of initial human capital is low, the economy might be caught in a poverty trap.

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File URL: http://mpra.ub.uni-muenchen.de/21020/1/MPRA_paper_21020.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21020.

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Date of creation: 27 Feb 2010
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Handle: RePEc:pra:mprapa:21020
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  1. Poutvaara, Panu, 2006. "On the political economy of social security and public education," Munich Reprints in Economics 19551, University of Munich, Department of Economics.
  2. Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 651-664.
  3. CASAMATTA, Georges & CREMER, Helmuth & PESTIEAU, Pierre, 1999. "The political economy of social security," CORE Discussion Papers 1999055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Kaganovich, Michael & Zilcha, Itzhak, 1999. "Education, social security, and growth," Journal of Public Economics, Elsevier, vol. 71(2), pages 289-309, February.
  5. Fernandez, Raquel & Rogerson, Richard, 1995. "On the Political Economy of Education Subsidies," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 249-62, April.
  6. Alexander Kemnitz, 2000. "Social security, public education, and growth in a representative democracy," Journal of Population Economics, Springer, vol. 13(3), pages 443-462.
  7. Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January.
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