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Political Rivalry Effects on Human Capital Accumulation and Inequality: A New Political Economy Approach
Author(s) -
Sochirca Elena,
Afonso Oscar,
Silva Sandra T.
Publication year - 2017
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12140
Subject(s) - rivalry , economics , human capital , incentive , politics , inequality , economic inequality , capital (architecture) , economic system , market economy , macroeconomics , political science , history , mathematical analysis , mathematics , archaeology , law
Abstract We propose an endogenous growth model with new political economy elements in order to (1) examine how political incentives affect economic allocations and (2) study the effects of political rivalry on human capital accumulation and income inequality. Focusing on two important policies affecting economic performance—fiscal policy and public investments in human capital accumulation—we find that different political incentives have distinct effects on policies and economic allocations. We also find that political rivalry increases income inequality and reduces economic growth and human capital accumulation through its negative impact on public investments in education, wages and individual learning choice.