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Optimal education and pensions in an endogenous growth model

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  • Del Rey, Elena
  • Lopez-Garcia, Miguel-Angel

Abstract

In OLG economies with life-cycle saving and exogenous growth, competitive equilibria in general fail to achieve optimality because individuals accumulate amounts of physical capital that differ from the one that maximizes welfare along a balanced growth path (the Golden Rule). With human capital, a second potential source of departure from optimality arises, related to education decisions. We propose to recover the Golden Rule of physical and also human capital accumulation. We characterize the optimal policy to decentralize the Golden Rule balanced growth path when there are no constraints for individuals to finance their education investments, and show that it involves education taxes. Also, when the government subsidizes the repayment of education loans, optimal pensions are positive.

Suggested Citation

  • Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2013. "Optimal education and pensions in an endogenous growth model," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1737-1750.
    • Handle: RePEc:eee:jetheo:v:148:y:2013:i:4:p:1737-1750
    DOI: 10.1016/j.jet.2013.01.003
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Optimal education and pensions in an endogenous growth model
      by Christian Zimmermann in NEP-DGE blog on 2010-03-29 23:22:20

    Citations

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    Cited by:

    1. Pierre Pestieau & Gregory Ponthiere, 2017. "Optimal fertility under age-dependent labour productivity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(2), pages 621-646, April.
    2. Zeng, Jinli & Zhang, Jie, 2022. "Education policies and development with threshold human capital externalities," Economic Modelling, Elsevier, vol. 108(C).
    3. Koichi Miyazaki, 2023. "Comparison of Educational Subsidy Schemes in an Endogenous Growth Model," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 79(1), pages 32-63.
    4. Simon Fan & Yu Pang & Pierre Pestieau, 2020. "A model of the optimal allocation of government expenditures," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 845-876, August.
    5. Elena Rey & Miguel-Angel Lopez-Garcia, 2019. "Optimal public policy à la Ramsey in an endogenous growth model," Journal of Economics, Springer, vol. 128(2), pages 99-118, October.
    6. George Economides & Apostolis Philippopoulos & Stylianos Sakkas, 2021. "Redistributive policies in general equilibrium," JRC Working Papers on Territorial Modelling and Analysis 2021-08, Joint Research Centre.
    7. Sylwia Radomska, 2019. "Optimal Policy for Investment in Human Capital in the Light of Optimal Tax Theory (Inwestycje w kapital ludzki w swietle optymalnej teorii podatkowej)," Research Reports, University of Warsaw, Faculty of Management, vol. 1(30), pages 34-42.
    8. 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.
    9. 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.
    10. Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2020. "On government-created credit markets for education and endogenous growth," Economic Modelling, Elsevier, vol. 92(C), pages 170-179.
    11. Julio Dávila, 2018. "Internalizing fertility and education externalities on capital returns," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(2), pages 343-373, August.
    12. Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2016. "Endogenous growth and welfare effects of education subsidies and intergenerational transfers," Economic Modelling, Elsevier, vol. 52(PB), pages 531-539.
    13. Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2019. "Public education, intergenerational transfers, and fertility," Economics Letters, Elsevier, vol. 179(C), pages 78-82.
    14. George Economides & Hyun Park & Apostolis Philippopoulos & Stelios Sakkas, 2015. "On the Composition of Public Spending and Taxes," CESifo Working Paper Series 5510, CESifo.

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    More about this item

    Keywords

    Endogenous growth; Human capital; Intergenerational transfers; Education policy;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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