January 2001

IZA DP No. 245: Globalization and Human Capital Formation

published in: International Tax and Public Finance, 2003, 10(3), 211-228

This paper compares education investment in closed and open economies without government and with a benevolent government. The fact that the time consistency problem in taxation can make labor mobility beneficial even if governments are fully benevolent - which is known from other contexts - is shown to be true in the economies considered. It is further shown that labor mobility is unambiguously beneficial if private insurance for human capital investment is available.