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Human Capital Formation With Heterogeneous Agents, Sustainable Debt Policies and Growth: Who Benefits from Fiscal Policy Rules?

Author

Listed:
  • Fabienne Dascher-Preising

    (Department of Business Administration and Economics, Bielefeld University)

  • Alfred Greiner

    (Department of Business Administration and Economics, Bielefeld University)

Abstract

We study an endogenous growth model with publicly funded human capital accumulation and with public debt, where we allow for heterogeneous households. One household acquires human capital while the other remains low-skilled. Aggregate production is a function of physical capital and of high-skilled and low-skilled labor. The government can run into debt, but, sticks to the inter-temporal budget constraint. We analyze the steady state and we investigate effects of fiscal policy on long-run growth and on the distribution of welfare. Further, we analyze effects of switching from a balanced government budget to permanent public deficits taking into account transition dynamics.

Suggested Citation

  • Fabienne Dascher-Preising & Alfred Greiner, 2024. "Human Capital Formation With Heterogeneous Agents, Sustainable Debt Policies and Growth: Who Benefits from Fiscal Policy Rules?," Annals of Economics and Finance, Society for AEF, vol. 25(1), pages 175-212, May.
    • Handle: RePEc:cuf:journl:y:2024:v:25:i:1:dascherpreisinggreiner
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    More about this item

    Keywords

    Human capital; Heterogeneous agents; Endogenous growth; Fiscal policy; Sustainable public debt;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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