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Credit constraints and human capital policies

Braz Camargo and Guilherme Stein

Journal of Public Economics, 2022, vol. 208, issue C

Abstract: We develop a model of voting to show how credit constraints affect a society’s demand for government spending on human capital policies, namely, policies that increase the returns to human capital investments. The main result of the model is that a reduction in credit constraints can increase the share of government spending on such policies, with a greater increase in poorer societies. We also provide suggestive cross-country evidence in support of our model by showing that the share of government spending on public education and health is negatively related to measures of credit constraints, with a stronger negative relation in poorer societies.

Keywords: Government spending; Credit constraints; Human capital policies (search for similar items in EconPapers)
JEL-codes: D72 H40 I00 J24 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jpubeco.2022.104624

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