A dynamic general equilibrium analysis of the political economy of public education

Soares, Jorge

doi:10.1007/s00148-005-0034-y

Cited by 21 publications

(24 citation statements)

References 16 publications

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“…This is in the same spirit as the key result of the above three papers mentioned above. However, the result changes once the general equilibrium e¤ects are taken into account and this somewhat supports the …ndings by Soares (2006) and very recently by Kaganovich and Zilcha (2012). 18 In equilibrium, the objective function for the political candidates becomes W (S t ; t ; t ) = !V o t (S t ; t ; t ) + V m t (S t ; t ; t ).…”

Section: Political Economy Of Two-armed Intergenerational Transferssupporting

confidence: 74%

“…In a relatively recent work, Rangel (2003) also focuses on the issue of sustainability when both forward and backward intergenerational goods are present and shows that backward intergenerational goods (BIGs), such as social security, play a crucial role in sustaining investment in forward intergenerational goods (FIGs) like education: without them investment is ine¢ ciently low, but with them optimal investment is possible. In contrast to these partial equilibrium studies, Soares (2006) in a calibrated general equilibrium OLG framework …nds that infusing a PAYG system exogenously results in a political equilibrium with lower funding for public education compared to the case when social security is absent. This happens because, under PAYG scheme, the increased incentive in investing in young's education to expand future wage bill is cancelled out by the increase in future interest rate, and thus the public education investment has no direct positive e¤ect on the present value of social security bene…ts (Kaganovich and Zilcha, 2012).…”

Section: Introductionmentioning

confidence: 85%

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The political intergenerational welfare state

Bishnu

Min

2017

Journal of Economic Dynamics and Control

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This paper characterizes an intergenerational welfare state with endogenous education and pension choice under general equilibrium-probabilistic voting. We show that politically implementing public education program always increases the future human capital, but this higher future human capital would not help support a more generous social security in the future. The effect of implementing PAYG social security on education however crucially depends on the sources of funding for education investment. Establishing PAYG pension program depresses investment in public education. However if the source of funding for education investment is private, in both the cases when pension is the only instrument or when public pension and public education are implemented together as a package, there can be an improvement in education investment if and only if the political influence of the old is limited and so the size of the PAYG social security is small. A substantially thick pension scheme which results from a heavy influence of the old in the political process spoils the mutual benefits. Abstract This paper characterizes an intergenerational welfare state with endogenous education and pension choice under general equilibrium-probabilistic voting. We show that politically implementing public education program always increases the future human capital, but this higher future human capital would not help support a more generous social security in the future. The e¤ect of implementing PAYG social security on education however crucially depends on the sources of funding for education investment. Establishing PAYG pension program depresses investment in public education. However if the source of funding for education investment is private, in both the cases when pension is the only instrument or when public pension and public education are implemented together as a package, there can be an improvement in education investment if and only if the political in ‡uence of the old is limited and so the size of the PAYG social security is small. A substantially thick pension scheme which results from a heavy in ‡uence of the old in the political process spoils the mutual bene…ts.

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Section: Political Economy Of Two-armed Intergenerational Transferssupporting

confidence: 74%

Section: Introductionmentioning

confidence: 85%

The political intergenerational welfare state

Bishnu

Min

2017

Journal of Economic Dynamics and Control

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“…Numerical simulations show the group of rich and poor prefer centralisation and the middle class prefers local education. Soares (2006) extends the political economy model of public funded education by using the general equilibrium overlapping generation model with altruism. 17.…”

Section: Discussionmentioning

confidence: 99%

The composition of government expenditure with alternative choicemechanisms

Creedy

Moslehi

2013

New Zealand Economic Papers

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This paper investigates the choice of the composition of government expenditure using both positive and normative approaches. The former involves aggregation over selfish voters (simple majority voting and stochastic voting are examined), while the latter involves the choice by a single disinterested individual (considered to maximise a social welfare function). The approach allows direct comparisons of the choice mechanisms. The structures examined include a transfer payment combined with a pure public good, and a transfer payment with tax-financed education. Explicit solutions are obtained for the choice of expenditure components, and these are shown to depend on the proportional difference between the arithmetic mean and another measure of location of incomes, where the latter depends on the choice mechanism. In each case the expenditure composition depends on an inequality measure defined in terms of the proportional difference between a measure of location of the income distribution and the arithmetic mean, where the location measure depends on the decision mechanism.

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“…The present study is related to the literature on the political economy of public education and pensions by Bearse, Glomm, and Janeba (2001), Soares (2006), Iturbe-Ormaetxe and Valera (2012), Kaganovich and Meier (2012), Kaganovich and Zilcha (2012), and Naito (2012). A common feature of these studies is that the two-dimensional voting aspect is reduced to one dimension for simplicity of analysis.…”

Section: Literature Reviewmentioning

confidence: 97%

Pensions, education, and growth: A positive analysis

Ono

Uchida

2016

Journal of Macroeconomics

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This study presents an overlapping generations model to capture the nature of the competition between generations regarding two redistribution policies, public education and public pensions. From a political economy viewpoint, we investigate the e¤ects of population aging on these policies and economic growth. We show that greater longevity results in a higher pension-to-GDP ratio. However, an increase in longevity produces an initial increase followed by a decrease in the public educationto-GDP ratio. This, in turn, results in a hump-shaped pattern of the growth rate.

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A dynamic general equilibrium analysis of the political economy of public education

Cited by 21 publications

References 16 publications

The political intergenerational welfare state

The political intergenerational welfare state

The composition of government expenditure with alternative choicemechanisms

Pensions, education, and growth: A positive analysis

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