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Intergenerational complementarities in education, endogenous public policy, and the relation between growth and volatility

Theodore Palivos and Dimitrios Varvarigos

MPRA Paper from University Library of Munich, Germany

Abstract: We construct an overlapping generations model in which parents vote on the tax rate that determines publicly provided education and offspring choose their effort in learning activities. The technology governing the accumulation of human capital allows these decisions to be strategic complements. In the presence of coordination failure, indeterminacy and, possibly, growth volatility emerge. This indeterminacy can be eliminated by an institutional mechanism that commits to a minimum level of public education provision. Given that, in the latter case, the economy moves along a uniquely determined balanced growth path, we argue that such structural differences can account for the negative correlation between volatility and growth.

Keywords: Human Capital; Intergenerational Complementarities; Economic Growth; Endogenous Taxation; Volatility (search for similar items in EconPapers)
JEL-codes: H42 O41 H52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-hrm
Date: 2011-04-16
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Journal Article: Intergenerational Complementarities in Education, Endogenous Public Policy, and the Relation Between Growth and Volatility (2013) Downloads
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