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Intergenerational transfers: Public education and pensions with endogenous fertility

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  • Bishnu, Monisankar
  • Garg, Shresth
  • Garg, Tishara
  • Ray, Tridip

Abstract

We consider an overlapping generations economy, where parents are altruistic towards their children, and children provide old-age support to parents. We show that when the education loan market is imperfect, an education subsidy targeted towards achieving the complete-market level of education distorts fertility decisions. However, augmenting the education policy with pension support in the old-age can restore both education and fertility to complete-market level. This highlights that an Education-Pension package is more potent than perceived by the existing literature – it not only replaces the missing credit market but also corrects for fertility distortions. Our results also hold when state intervention in education is justified due to human-capital externality, instead of credit market frictions.

Suggested Citation

  • Bishnu, Monisankar & Garg, Shresth & Garg, Tishara & Ray, Tridip, 2023. "Intergenerational transfers: Public education and pensions with endogenous fertility," Journal of Economic Dynamics and Control, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:dyncon:v:153:y:2023:i:c:s0165188923001033
    DOI: 10.1016/j.jedc.2023.104697
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