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Optimal Fiscal Policy with Private and Public Investment in Education

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  • L. Marattin

Abstract

This paper develops a three periods OLG growth model where agents accumulate human capital in the first period (benefiting from grandfathers savings, public expenditure in education, and human capital level of their parents), work and save in the second period (earning a salary proportional to the human capital level accumulated), and retire in the thid period, leaving bequest on for the young generation. Government raises taxes on labour and capital in order to finance public expenditure in education. We derive conditions for equilibrium and for the rate of growth, and then carry out welfare analysis in order to determine optimal taxation in a Nash policy setting.

Suggested Citation

  • L. Marattin, 2007. "Optimal Fiscal Policy with Private and Public Investment in Education," Working Papers 589, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:589
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    1. Galor, Oded & Moav, Omer & Vollrath, Dietrich, 2003. "Land Inequality and the Origin of Divergence and Overtaking in the Growth Process: Theory and Evidence," CEPR Discussion Papers 3817, C.E.P.R. Discussion Papers.
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    6. Glomm, Gerhard & Ravikumar, B., 2003. "Public education and income inequality," European Journal of Political Economy, Elsevier, vol. 19(2), pages 289-300, June.
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    Cited by:

    1. Nikos Benos, 2010. "Education policy, growth and welfare," Education Economics, Taylor & Francis Journals, vol. 18(1), pages 33-47.

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