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

Palivos, Theodore and Varvarigos, Dimitrios (2011): Intergenerational complementarities in education, endogenous public policy, and the relation between growth and volatility.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Human Capital, Intergenerational Complementarities, Economic Growth, Endogenous Taxation, Volatility
• Subjects: H - Public Economics > H4 - Publicly Provided Goods > H42 - Publicly Provided Private Goods; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; H - Public Economics > H5 - National Government Expenditures and Related Policies > H52 - Government Expenditures and Education

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