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Going for growth: overeducation in a tax competition game

Research output: Working paper


Publication date2002
Place of PublicationLancaster University
PublisherThe Department of Economics
<mark>Original language</mark>English

Publication series

NameEconomics Working Paper Series


A model of international tax competition is developed in which taxes are raised in order to finance education which in turn raises income. It is shown that, in contrast to results from the tax competition literature, the outcome of a non-cooperative game can be to raise the tax rate, with the result that investment in education exceeds that which is globally socially optimal. This provides an explanation for the tendency for countries to emphasise growth as an objective in spite of what empirical studies tell us about the impact of income on happiness; it also identifies a new type of overeducation.