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Education, borrowing constraints and growth: A note

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  • Hatcher, Michael

Abstract

Kitaura (2012) shows an inverse U-shape relationship between balanced growth and the tightness of educational borrowing constraints and argues that a loosening of constraints need not be Pareto-improving even if growth increases. We provide a careful analysis of the transition, showing that an unanticipated loosening of credit constraints is welfare-improving for initial generations, but may be detrimental to (some) subsequent generations when growth increases. Thus, we argue that governments concerned with re-election may support a loosening of credit at the expense of future generations.

Suggested Citation

  • Hatcher, Michael, 2022. "Education, borrowing constraints and growth: A note," Economics Letters, Elsevier, vol. 212(C).
    • Handle: RePEc:eee:ecolet:v:212:y:2022:i:c:s0165176522000039
    DOI: 10.1016/j.econlet.2022.110274
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    References listed on IDEAS

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    1. 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.
    2. Kitaura, Koji, 2012. "Education, borrowing constraints and growth," Economics Letters, Elsevier, vol. 116(3), pages 575-578.
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    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.

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