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Globalization and human capital formation
[Globalisierung und Humankapitalinvestitionen]

  • Andersson, Frederik
  • Konrad, Kai A.

This paper compares education investment in closed and open economies without government and with a benevolent government. Closed economies suffer from a holdup problem of excessive redistribution, and governments use education policy as a second-best tool. Globalization that increases labor mobility reduces governments’ incentives to provide subsidized education and increases private individuals’ incentives for investment in their human capital. Globalization can improve welfare, and even restore full efficiency. Governments’ scope for redistribution – which is a substitute for private income insurance – is reduced, and whether efficiency is restored depends on how private insurance markets react to the change in redistribution policy.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number FS IV 01-01.

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Date of creation: 2001
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Handle: RePEc:zbw:wzbmpg:fsiv0101
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