Human Capital Investment and Globalization in Extortionary States

23 Pages Posted: 3 Apr 2001

See all articles by Fredrik Andersson

Fredrik Andersson

Lund University - Department of Economics

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Date Written: April 2002

Abstract

This paper considers education investment and public education policy in closed and open economies with an extortionary government. The extortionary government in a closed economy chooses an education policy 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 mobile. Extortionary governments' incentives for a policy that stimulates higher private education efforts vanish; instead they have incentives to prevent individuals from mobility-increasing education investment. Tax competition therefore reduces hold-up problems of time-consistent extortionary taxation, but introduces other distortions that reduce workers' utility.

Keywords: Migration, Education, Globalization, Commitment, Time Consistent Income Taxation

JEL Classification: H21, H23

Suggested Citation

Andersson, Fredrik and Konrad, Kai A., Human Capital Investment and Globalization in Extortionary States (April 2002). CESifo Working Paper Series No. 703; IZA Discussion Paper No. 239. Available at SSRN: https://ssrn.com/abstract=265610 or http://dx.doi.org/10.2139/ssrn.265610

Fredrik Andersson (Contact Author)

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07 Lund
Sweden
+46 46 222 8676 (Phone)
+46 46 222 4118 (Fax)

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Germany

IZA Institute of Labor Economics

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Bonn, 53072
Germany

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