Technical Report Generational Conflict and Education Politics : Implications for Growth and Welfare

Ono, Tetsuo  ,  Uchida, Yuki

18-05-Rev.pp.1 - 36 , 2018-11 , Graduate School of Economics and Osaka School of International Public Policy (OSIPP) Osaka University
Description
* Revised:Capital Income Taxation, Economic Growth, and the Politics of Public Education [18-05, 2018]
This study considers the politics of public education and its impact on economic growth and welfare across generations. We employ probabilistic voting to demonstrate the generational conflict regarding taxes and spending, and show that aging results in a tax burden shift from the retired to the working generation, a reduction in public education spending, and ultimately in slowing down economic growth. We subsequently consider a legal constraint that aims to boost education spending: a spending floor for education. This constraint stimulates economic growth, but creates a trade-off between current and future generations in terms of welfare. Finally, the quantitative implications of our results are explored by calibrating the model to the Japanese economy.

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