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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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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. CASAMATTA, Georges & CREMER , Helmuth & PESTIEAU, Pierre, . "The political economy of social security," CORE Discussion Papers RP 1475, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Poutvaara, Panu, 2004. "On the Political Economy of Social Security and Public Education," IZA Discussion Papers 1408, Institute for the Study of Labor (IZA).
  3. Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
  4. Kaganovich, M & Zilcha, I, 1997. "Education, Social Security and Growth," Papers 1-97, Tel Aviv.
  5. repec:oup:restud:v:62:y:1995:i:2:p:249-62 is not listed on IDEAS
  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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