Abstract
Globalization is supposed to increase the mobility of highly skilled labor and to reduce governments' scope for redistribution. We show that this increases the private incentives for education and may decrease, but may also increase, the government's incentives to provide education subsidies in a framework in which education investment is risky. Globalization shifts the cost of these subsidies to the less skilled. For the welfare implications of globalization the availability of private insurance is crucial. Welfare unambiguously increases if such markets work.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Arnott, R. J. and J. E. Stiglitz. (1986). “Moral Hazard and Optimal Commodity Taxation.” Journal of Public Economics 29(1), 1-24.
Besley, T. (1995). “Non-Market Institutions for Credit and Risk Sharing in Low-Income Countries.” Journal of Economic Perspectives 9, 115-127.
Boadway, R., N. Marceau and M. Marchand. (1996). “Investment in Education and the Time Inconsistency of Redistributive Tax Policy.” Economica 63, 171-189.
Boadway, R. and M. Marchand. (1995). “The Use of Public Expenditures for Redistributive Purposes.” Oxford Economic Papers 47, 45-59.
Cullen, J. B. and J. Gruber. (2000). “Does Unemployment Insurance Crowd out Spousal Labor Supply?” Journal of Labor Economics 18, 546-572.
Cutler, D. M. and J. Gruber. (1995). “Does Public Insurance Crowd out Private Insurance?” NBER Working Paper No. 5082.
Dewatripont, M. and G. Roland. (2000). “Soft Budget Constraints, Transition, and Financial Systems.” Journal of Institutional and Theoretical Economics 156, 245-260.
DiTella, R. and R. MacCulloch. (1997). “Does the Welfare State Destroy the Family?” Oxford Applied Economics Discussion Paper No. 195.
Eaton, J. and H. S. Rosen. (1980). “Taxation, Human Capital, and Uncertainty.” American Economic Review 70, 705-715.
Gorsky, M. (1998). “The Growth and Distribution of English Friendly Societies in the 19th Century.” Economic History Review 51, 489-511.
Hagen, K. P., P. Osmundsen and G. Schjelderup. (1995). “Personal Income Taxation and Welfare Appropriation in an Open Economy.” Paper presented at the Tutzing Conference on Competition or Harmonization.
Horrell, S. and D. Oxley. (2000). “Work and Prudence: Household Responses to Income Variation in Nineteenth-Century Britain.” European Review of Economic History 4, 27-57.
Justman, M. and J.-F. Thisse. (1997). “Implications of the Mobility of Skilled Labor for Local Public Funding of Higher Education.” Economics Letters 55, 409-412.
Justman, M. and J.-F. Thisse. (2000). “Local Public Funding of Higher Education when Skilled Labor is Imperfectly Mobile.” International Tax and Public Finance 7, 247-258.
Kehoe, P. J. (1989). “Policy Cooperation among Benevolent Governments May Be Undesirable.” Review of Economic Studies 56, 289-296.
Konrad, K. A. (2001). “Privacy and Time Consistent Optimal Labor Income Taxation.” Journal of Public Economics 79, 503-519.
OECD. (2001a). Education at a Glance: OECD Indicators. Paris.
OECD. (2001b). OECD in Figures, Statistics on the Member Countries. Paris.
Poutvaara, P. (1999). “Investment in Education and Redistributive Taxation without Precommitment.” Mimeo.
Poutvaara, P. (2000). “Education, Mobility of Labor and Tax Competition.” International Tax and Public Finance 7, 699-719.
Poutvaara, P. and V. Kanniainen. (2000). “Why Invest in Your Neighbor? Social Contract on Education Investment.” International Tax and Public Finance 7, 547-563.
Rosenzweig, M. R. (1988). “Risk, Implicit Contracts and the Family in Rural Areas of Low-Income Countries.” Economic Journal 98, 1148-1170.
Shavell, S. (1979). “On Moral Hazard and Insurance.” Quarterly Journal of Economics 93, 541-562.
Sinn, H.-W. (1996). “Social Insurance, Incentives and Risk Taking.” International Tax and Public Finance 3, 259-280.
Stern, N. H. (1982). “Optimum Income Taxation with Errors in Administration.” Journal of Public Economics 17, 181-211.
Stiglitz, J. E. (1982). “Self-Selection and Pareto Efficient Taxation.” Journal of Public Economics 17, 213-240.
Varian, H. R. (1980). “Redistributive Taxation as Social Insurance.” Journal of Public Economics 14, 49-68.
Wildasin, D. (2000a). “Labor Market Integration, Investment in Risky Human Capital, and Fiscal Competition.” American Economic Review 90, 73-95.
Wildasin, D. (2000b). “Factor Mobility and Fiscal Policy in the EU: Policy Issues and Analytical Approaches.” Economic Policy 31, 337-378.
Wilson, J. D. and D.Wildasin. (1996). “Imperfect Mobility and Local Government Behaviour in an Overlapping-Generations Model.” Journal of Public Economics 60, 177-198.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Andersson, F., Konrad, K.A. Globalization and Risky Human-Capital Investment. International Tax and Public Finance 10, 211–228 (2003). https://doi.org/10.1023/A:1023862229689
Issue Date:
DOI: https://doi.org/10.1023/A:1023862229689