Globalization, Redistribution, and the Composition of Public Education Expenditures

An issue that deserves further attention is whether the pattern between globalization and
public education expenditures that we have observed in the empirical investigations is indeed
due to the “transmission channels” considered in our theoretical model. While the model
provides one explanation for the empirical pattern, there might be competing arguments. A
more complete test our our theory should, for example, explicitly show that globalization (i)
has reduced the tax burden of the high-skilled while (ii) increasing, with an appropriate time
lag, the market income of the low-skilled in developing countries due to the shift in education
expenditures.

This, however, is dicult with the available data. With respect to the rst point, the
problem is to nd an appropriate measure of the tax burden of rms and individuals. While
this is already a contentious issue for industrialized countries, the situation is even more
dicult for developing countries for which the underlying data on taxes is sketchy. With
respect to the second point, the unavailability of disaggregated data on the market income of
the high- and low-skilled is, especially in developing countries, the main problem. Finding an
appropriate strategy to dierentiate between dierent theoretical arguments for the observed
empirical pattern is therefore a promising avenue for future research.

Acknowledgments

We are grateful to the participants of the 3^rd CESifo Workshop on Political Economy in
Dresden, in particular Heike Auerswald, Henning Bohn, Christian Lessmann, and Thierry A.
Verdier, for helpful comments and suggestions.

References

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Alesina, A. and R. Wacziarg (1998). Openness, Country Size and Government. Journal of
Public Economics 69 (3), 305 - 321.

Anderson, F. and K. A. Konrad (2003). Human Capital Investment and Globalization in
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Anderson, T. M. (2005). Migration, Taxation and Educational Incentives. Economics Let-
ters 87 (3), 399-405.

Ansell, B. W. (2008). Traders, Teachers, and Tyrants: Democracy, Globalization, and Public
Investment in Education. International Organization 62 (2), 289-322.

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