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Human Capital Investment under Quasi-Geometric Discounting

Author

Listed:
  • Karl David Boulware

    (Department of Economics, Wesleyan University)

  • Robert R. Reed

    (Department of Economics, Finance, and Legal Studies, University of Alabama)

  • Ejindu Ume

    (Department of Economics, Miami University)

Abstract

Recent work by Laibson (1997) identifies that individuals are excessively impatient in the short-run, but wish to become more patient over time. It is often argued that such a time-inconsistency problem distorts individuals’ savings decisions. The objective of this paper is to study human capital accumulation in the presence of a time-inconsistency problem. In doing so, we explain that many policies put into place to take advantage of the inter-personal benefits from human capital accumulation may also be important for resolving ‘intra-personal’ planning problems. Our results also shed light on the role of compulsory education.

Suggested Citation

  • Karl David Boulware & Robert R. Reed & Ejindu Ume, 2016. "Human Capital Investment under Quasi-Geometric Discounting," Wesleyan Economics Working Papers 2016-003, Wesleyan University, Department of Economics.
    • Handle: RePEc:wes:weswpa:2016-003
    as

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    File URL: http://repec.wesleyan.edu/pdf/kboulware/2016003_boulware.pdf
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    References listed on IDEAS

    as
    1. Krusell, Per & Kuruscu, Burhanettin & Smith, Anthony Jr., 2002. "Equilibrium Welfare and Government Policy with Quasi-geometric Discounting," Journal of Economic Theory, Elsevier, vol. 105(1), pages 42-72, July.
    2. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
    3. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Human Capital; Quasi-Geometric Discounting;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • I2 - Health, Education, and Welfare - - Education

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