Technical Report Human Capital, Public Debt, and Economic Growth: A Political Economy Analysis

Ono, Tetsuo  ,  Uchida, Yuki

16-01-pp.1 - 55 , 2016-08 , Graduate School of Economics and Osaka School of International Public Policy (OSIPP) Osaka University
* Revised: [16-01, 2016]
This study considers public education policy and its impact on growth and welfare across generations. In particular, the study compares two fiscal perspectives-tax finance and debt finance|and shows that in a competitive equilibrium context,the growth and utility in the debt-finance case could be higher than those in the tax-finance case in the long run. However, the opposite occurs when the policy is shaped by politics. When the degree of parents' altruism is low, they choose debt finance in their voting, despite its long-run worse performance because a current generation can pass the cost of debt repayment to future generations.

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