IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v116y2012i3p575-578.html
   My bibliography  Save this article

Education, borrowing constraints and growth

Author

Listed:
  • Kitaura, Koji

Abstract

This paper studies the effects of educational borrowing constraints on economic growth and welfare. We consider a three-period-lived overlapping generations model in which individuals finance their educational expenditures by borrowing. We show that if the elasticity of human capital to educational expenditure is great enough, the relationship between the tightness of the constraints and the growth rate is inverted-U shaped when the constraints are binding. Moreover, when the constraints cease to be binding, the growth rate is constant. We also show that a relaxation of the constraints cannot be Pareto improving even if the growth rate rises.

Suggested Citation

  • Kitaura, Koji, 2012. "Education, borrowing constraints and growth," Economics Letters, Elsevier, vol. 116(3), pages 575-578.
    • Handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:575-578
    DOI: 10.1016/j.econlet.2012.05.053
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176512003217
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2012.05.053?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Willem H. Buiter & Kenneth M. Kletzer, 1995. "Capital Mobility, Fiscal Policy, and Growth under Self-Financing of Human Capital Formation," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 163-194, November.
    2. Hendricks, Lutz, "undated". "Taxation and Long-Run Growth," Working Papers 96/2, Arizona State University, Department of Economics.
    3. De Gregorio, Jose, 1996. "Borrowing constraints, human capital accumulation, and growth," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 49-71, February.
    4. David Croix & Philippe Michel, 2007. "Education and growth with endogenous debt constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(3), pages 509-530, December.
    5. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, April.
    6. Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-350, April.
    7. Robert J. Barro & Rachel McCleary, 2003. "Religion and Economic Growth," NBER Working Papers 9682, National Bureau of Economic Research, Inc.
    8. Akira Yakita, 2004. "School Loans, Subsidies, and Economic Growth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(2), pages 262-276, August.
    9. Aghion, Philippe & Bacchetta, Philippe & Banerjee, Abhijit, 2004. "Financial development and the instability of open economies," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1077-1106, September.
    10. Hendricks, Lutz, 1999. "Taxation and long-run growth1," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 411-434, April.
    11. John Laitner, 2000. "Earnings within Education Groups and Overall Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 807-832, August.
    12. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521806428.
    13. Tullio Jappelli & Marco Pagano, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 83-109.
    14. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151.
    15. Chen, Hung-ju, 2005. "Educational systems, growth and income distribution: a quantitative study," Journal of Development Economics, Elsevier, vol. 76(2), pages 325-353, April.
    16. Rangazas, Peter, 2000. "Schooling and economic growth: A King-Rebelo experiment with human capital," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 397-416, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abida Naurin & Panayiotis M. Pourpourides, 2023. "On the causality between household and government spending on education: evidence from a panel of 40 countries," Empirical Economics, Springer, vol. 65(2), pages 567-585, August.
    2. Michael Hatcher & Panayiotis M. Pourpourides, 2023. "Does the impact of private education on growth differ at different levels of credit market development?," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 291-322, February.
    3. Bhattacharya, Joydeep & Qiao, Xue & Wang, Min, 2016. "Endogenous Borrowing Constraints And Wealth Inequality," Macroeconomic Dynamics, Cambridge University Press, vol. 20(6), pages 1413-1431, September.
    4. Miyazaki, Koichi, 2016. "Student loans, fertility, and economic growth," MPRA Paper 71604, University Library of Munich, Germany.
    5. Ryota Nakano, 2024. "Intergenerational Mobility and Student Loans," ISER Discussion Paper 1248, Institute of Social and Economic Research, Osaka University.
    6. Takayuki Ogawa & Hiroaki Ohno, 2024. "Hyperbolic discounting and state‐dependent commitment," Economica, London School of Economics and Political Science, vol. 91(362), pages 414-445, April.
    7. Hatcher, Michael, 2022. "Education, borrowing constraints and growth: A note," Economics Letters, Elsevier, vol. 212(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Hatcher & Panayiotis M. Pourpourides, 2023. "Does the impact of private education on growth differ at different levels of credit market development?," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 291-322, February.
    2. Simone Valente, 2005. "Tax Policy and Human Capital Formation with Public Investment in Education," Journal of Economics, Springer, vol. 86(3), pages 229-258, December.
    3. Wang, Min, 2010. "Essays on Environment, Natural Resource, Growth and Development," ISU General Staff Papers 201001010800002824, Iowa State University, Department of Economics.
    4. Erasmo Papagni, 2008. "The Long-run Effects of Household Liquidity Constraints and Taxation on Fertility, Education, Saving, and Growth," Discussion Papers 11_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    5. Alessandra Casarico & Alessandro Sommacal, 2012. "Labor Income Taxation, Human Capital, and Growth: The Role of Childcare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1182-1207, December.
    6. Ryo Horii & Akiomi Kitagawa & Koichi Futagami, 2008. "Availability Of Higher Education And Long‐Term Economic Growth," The Japanese Economic Review, Japanese Economic Association, vol. 59(2), pages 156-177, June.
    7. David Croix & Philippe Michel, 2007. "Education and growth with endogenous debt constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(3), pages 509-530, December.
    8. Maria Sarigiannidou & Theodore Palivos, 2012. "A Modern Theory of Kuznets’ Hypothesis," Working Papers 201202, Texas Christian University, Department of Economics.
    9. Chaitali Sinha, 2014. "Human Capital and Public Policy," South Asian Journal of Macroeconomics and Public Finance, , vol. 3(1), pages 79-125, June.
    10. Tansel, Aysit & Öztürk, Ceyhan & Erdil, Erkan, 2021. "The Impact of Body Mass Index on Growth, Schooling, Productivity, and Savings: A Cross-Country Study," GLO Discussion Paper Series 929, Global Labor Organization (GLO).
    11. Lartigue-Mendoza, Jacques & Domínguez, Salomón, 2021. "The Effect of Wages on Human Capital Investment," EconStor Preprints 246818, ZBW - Leibniz Information Centre for Economics.
    12. Ben Fine, 1998. "Endogenous Growth Theory: A Critical Assessment," Working Papers 80, Department of Economics, SOAS University of London, UK.
    13. Soares, Jorge, 2015. "Borrowing constraints, parental altruism and welfare," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 1-20.
    14. Luciano Fanti, 2012. "Consequences of a boost of mandatory retirement age on long run income and PAYG pensions," Discussion Papers 2012/149, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    15. Wei-Bin Zhang, 2016. "Impact of Education Subsidies and Taxation on Wealth and Human Capital Accumulation," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 2(3), pages 222-247.
    16. Miyazaki, Koichi, 2016. "Student loans, fertility, and economic growth," MPRA Paper 71604, University Library of Munich, Germany.
    17. Chen, Jinzhao & Quang, Thérèse, 2014. "The impact of international financial integration on economic growth: New evidence on threshold effects," Economic Modelling, Elsevier, vol. 42(C), pages 475-489.
    18. Torben Andersen & Joydeep Bhattacharya, 2020. "Intergenerational Debt Dynamics Without Tears," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 192-219, January.
    19. Freddy Heylen & Lorenzo Pozzi, 2007. "Crises and human capital accumulation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(4), pages 1261-1285, November.
    20. Petrucci, Alberto, 2015. "Optimal income taxation in models with endogenous fertility," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 216-225.

    More about this item

    Keywords

    Education; Borrowing constraints; Economic growth;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:575-578. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.