Human Capital Investment and Globalization in Extortionary States

Fredrik Andersson () and Kai Konrad

No 239, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper considers education investment and public education subsidies in closed and open economies with an extortionary government. The extortionary government in a closed economy has incentives to subsidize education in order to overcome a hold-up problem of time consistent taxation, similar to benevolent governments. The two types of government differ in their education policies if highly productive labor is fully mobile. Extortionary governments’ incentives for education subsidies vanish and they even have an incentive to prevent individuals from mobility increasing education investment. Tax competition therefore reduces hold-up problems of time consistent extortionary taxation, but also introduces incentives that reduce workers’ utility.

Keywords: time consistent income taxation; commitment; migration; Globalization; education (search for similar items in EconPapers)
JEL-codes: H21 H23 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2001-01
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Citations: View citations in EconPapers (9)

Published - published in: Journal of Public Economics, 2003, 87 (7-8), 1539-1555

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Related works:
Journal Article: Human capital investment and globalization in extortionary states (2003)
Working Paper: Human Capital Investment and Globalization in Extortionary States (2002)
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