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Intergenerational Externalities

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  • Edward Lazear

Abstract

A common theme which runs through much of the investment literature is that private incentives may lead to sub-optimal levels of investment activity. The idea has been extended casually to consideration of human capital investment as well. It is sometimes contended that decisions, made by parents, have adverse effects on their offspring, which could be prevented if inter-generational contracts could be struck. If so, a case can be made for government intervention or subsidization programs to alleviate these intergenerational externalities. Specifically, the sub-optimal investment in offspring human capital may take such obvious forms as poor clothing, too little health care, or too few resources devoted to the child's education. Less obvious externalities may result when parents underinvest in themselves because they fail to consider spillover benefits to their children. Parental schooling, for example, may affect the child's ability (or desire) to learn. Dietary patterns established by parents for themselves may influence the child's eating habits and affect his health. More directly, healthy parents are less likely to transmit diseases to their offspring. This paper will examine the effects of these intergenerational externalities in greater detail.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 16 (1983)
Issue (Month): 2 (May)
Pages: 212-28

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Handle: RePEc:cje:issued:v:16:y:1983:i:2:p:212-28

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References

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  1. Edward P. Lazear, 1975. "Education: Consumption or Production," NBER Working Papers 0104, National Bureau of Economic Research, Inc.
  2. Brown, Charles, 1976. "A Model of Optimal Human-Capital Accumulation and the Wages of Young High School Graduates," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 299-316, April.
  3. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
  4. Ishikawa, Tsuneo, 1975. "Family Structures and Family Values in the Theory of Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 83(5), pages 987-1008, October.
  5. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  6. Bowles, Samuel, 1972. "Schooling and Inequality from Generation to Generation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S219-S51, Part II, .
  7. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
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Cited by:
  1. Alice Schoonbroodt & Michele Tertilt, 2010. "Who Owns Children and Does It Matter?," Working Papers id:2360, eSocialSciences.
  2. Edward P. Lazear, 1995. "Culture and Language," NBER Working Papers 5249, National Bureau of Economic Research, Inc.
  3. Schoonbroodt, Alice & Tertilt, Michèle, 2014. "Property rights and efficiency in OLG models with endogenous fertility," Journal of Economic Theory, Elsevier, vol. 150(C), pages 551-582.

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