Education, Political Instability, and Growth
Empirical evidence suggests a positive association between income levels and growth rates on the one hand, and political stability and educational attainment on the other. This paper develops a simple finite--horizon overlapping growth model that in the absence of institutions for precommitment has a political equilibrium with inefficiently low growth, low educational attainment, and high returns to schooling. In the model, the laissez-faire growth rate is inefficient due to an intergenerational externality in the decision to accumulate knowledge. We then contrast the efficient growth rate with the outcome when there is a sequence of governments with an objective that reflects the preferences of the individuals currently alive. The result is an equilibrium in which growth remains inefficiently low because future agents are unable to reward those currently alive to induce them to accumulate knowledge. The ability to achieve higher efficient growth hinges on either the government's ability to set policies that cannot be undone by subsequent governments, or on an alternative ``trigger strategy'' equilibrium in which each government believes it will be punished by the next if it deviates from the optimal policy.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" 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.
|Date of creation:||1996|
|Date of revision:|
|Contact details of provider:|| Postal: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ljungqvist, L., 1992. "Economic Development, Wage Structure and Implicit Insurance on Human Capital," Papers 512, Stockholm - International Economic Studies.
- James A Kahn & Jong-Soo Lim, 2001.
"Finite Horizons, Political Economy, and Growth,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 1-25, January.
- James A. Kahn & Jong-Soo Lim, 2000. "Finite horizons, political economy, and growth," Staff Reports 102, Federal Reserve Bank of New York.
- Kahn, J.A. & Lim, J.S., 1996. "Finite Horizons, Political Economy, and Growth," RCER Working Papers 433, University of Rochester - Center for Economic Research (RCER).
- Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
- Kotlikoff, Laurence J & Persson, Torsten & Svensson, Lars E O, 1988. "Social Contracts as Assets: A Possible Solution to the Time-Consistency Problem," American Economic Review, American Economic Association, vol. 78(4), pages 662-77, September.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Cukierman, Alex & Meltzer, Allan H, 1989. "A Political Theory of Government Debt and Deficits in a Neo-Ricardian Framework," American Economic Review, American Economic Association, vol. 79(4), pages 713-32, September.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
- Persson, Mats & Persson, Torsten & Svensson, Lars E O, 1987. "Time Consistency of Fiscal and Monetary Policy," Econometrica, Econometric Society, vol. 55(6), pages 1419-31, November.
When requesting a correction, please mention this item's handle: RePEc:roc:rocher:434. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard DiSalvo)
If references are entirely missing, you can add them using this form.