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Intergenerational complementarities in education and the relationship between growth and volatility

By Theodore Palivos and Dimitrios Varvarigos

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 cycles emerge. In the absence of coordination failure, 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

Topics: Human Capital, Economic Growth, Volatility
Publisher: Dept. of Economics, University of Leicester
Year: 2009
OAI identifier: oai:lra.le.ac.uk:2381/7597

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