سرمایه گذاری سرمایه انسانی و جهانی شدن در کشورهای استعمارگر

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.

The transaction costs of migration are declining in Europe. Migration obstacles within the EU, for instance, have been abolished in several steps, with the biggest step made in 1992 when the common market that granted free mobility for factors was introduced. The resulting increase in mobility is discussed and documented in, for example, Wildasin (2000). In addition, the further EU enlargement that opens up the labor markets between the current members of the EU and the countries currently applying for membership, as well as other global trends, will further increase labor mobility in the first decade of the new century. In this paper we consider the impact of increased mobility for education policy and the taxation of returns from human capital investment. The starting point of this paper is the well-established insight that optimal education policy and taxation of human capital income are closely related. Human capital investment suffers from a severe hold-up problem. The optimal time consistent tax on the returns from human capital investment is high at the time when education investment decisions are already made. This high tax is anticipated by individuals at the stage when they make their investment choices, and this reduces their incentives to invest.1Boadway et al. (1996) analyze this problem and show that mandatory education or, similarly, subsidized provision of public education is a natural solution to this problem.2 Hence, public provision of education is a second-best policy. It is chosen as a remedy for the detrimental welfare effects of time consistent human capital income taxation in a closed economy.3 While Boadway et al. (1996) consider benevolent governments, it is clear that benevolent governments as well as kleptocrat or Leviathan governments face the same hold-up problem when it comes to the taxation of human capital returns; hence, their analysis carries over qualitatively to the Leviathan case. Increased international mobility of skilled labor changes the set of constraints under which national policies are chosen. Taking the private investment problem and time consistent taxation as an isolated problem, it has been emphasized in the tax competition literature that the increased mobility of a tax base—such as highly skilled workers and their income—constrains the national governments in their ability to tax, because the individuals can avoid paying one country’s taxes by moving to another country. Hence, international mobility of skilled labor changes the taxation problem, and may solve the hold-up problem of time consistent taxation. This was pointed out in the context of capital income taxation by Kehoe (1989) for the case of benevolent redistributive taxation. Other contributions have addressed the issue of education policy as an isolated problem disregarding the time consistency issue. For instance, Justman and Thisse (2000) start with the assumption that education must be provided publicly for exogenous reasons, and conclude that mobility of the highly skilled may necessitate harmonization or coordination between the countries’ policies. In principle, this coordination could take place on the expenditure side (coordinated spending on public education), or on the revenue side (coordination of human capital taxes). These contributions disregard the important fact that public education provision and high income taxes are symptoms for a more fundamental time consistency problem, and that education policy is already a second-best policy that addresses an existing distortion: the hold-up problem due to time consistent taxation of human capital returns. For a benevolent government that uses tax revenue to redistribute according to a welfarist objective, this connection is taken into account in the analysis of increased mobility by Andersson and Konrad (2000). As is shown there, full mobility of the skilled does not necessarily eliminate the incentives for public provision of education or education subsidies, and does not necessarily generate an allocation problem. On the contrary, full mobility may restore efficiency. In this paper we consider tax policy and public provision of education for a Leviathan government, concentrating on the close link between taxation and education policy. We start with a closed economy that resembles the Leviathan models of government in Olson (1993) and McGuire and Olson (1996) but introduce the problem of time consistent taxation in this framework. We find that a Leviathan would like to overcome the hold-up problem of time consistent taxation by education subsidies. We show that this policy can benefit both the Leviathan and the people. Our main results are on the impact of mobility of skilled labor. Having solved for the case with no international mobility by considering the closed economy, we compare this outcome with the case of full mobility, and with the intermediate case with finite but positive mobility cost. With full mobility, we show that the Leviathan fully abstains from any public provision of education or education subsidies. In fact, the Leviathan may restrict or eliminate private investment in education in this case. It is important to note that this outcome, i.e. full elimination of private investment, is inferior to the closed economy outcome both for the Leviathan and for the individuals. Depending on how the Leviathan can adjust the education policy to a switch from a closed economy to a globalized economy in which the highly skilled workers are mobile, the individuals’ expected utility can be higher or lower in the globalized world compared with the closed economy case. In a static context with taxes being the only decision variables, the view is well established that increased international tax-base mobility benefits the population if the Leviathan does not spend the tax revenue on activities that benefit the population. Our result shows that the outcome can be different in a dynamic context. If Leviathans can distort an investment decision that affects mobility, they still dislike tax competition, but tax competition between Leviathans need no longer be beneficial for the people; this is true even if the Leviathan fully appropriates all tax revenues for personal use.4 We also solve for the tax competition equilibria if the highly skilled workers have finite but strictly positive migration costs. We find that the expected tax revenues in the equilibrium exceed the sum of migration cost that would occur if every highly skilled worker moves to another country. In the next section we set out the model, and in Section 3 we consider the closed economy case. In Section 4 we consider a globalized world, and in Section 5 we conclude.

In this paper we analyzed the equilibrium outcome on education policy, private education investment, and income taxation, both in a closed economy and in a globalized economy where the government is a Leviathan. As a starting point, the paper has acknowledged the close relationship between education policies and time consistent tax policy. In closed economies, the Leviathan acts in a way very similar to a benevolent welfare-maximizing government, leading to similar outcomes in terms of education policies as well as private education effort in the two cases. In the open economy context with free mobility of highly productive labor, however, the two types of government exhibit very different behavior. As has been shown in Andersson and Konrad (2000), benevolent governments may still spend money on education policies. Leviathans do not. Leviathans will spend resources on making it more likely that individuals do not become highly skilled (and mobile); if costlessly possible, they would wish to prohibit education. As a result, mobility of the highly skilled and the induced tax competition reduces the Leviathan’s utility. The individuals’ utility may increase or decrease. Utility clearly increases if the Leviathan’s education policy remains unchanged. If the Leviathan can discourage education effectively, however, the constraints introduced by mobility may reduce the equilibrium utility for Leviathans and for individuals. These results corroborate a more general conclusion, viz. that the competition among extortionary governments induced by increased mobility of factors is likely not only to bring beneficial tax competition, but also additional distortions that may be socially costly.