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Education, borrowing constraints and growth

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  • Kitaura, Koji

Abstract

This paper studies the effects of educational borrowing constraints on economic growth and welfare. We consider a three-period-lived overlapping generations model in which individuals finance their educational expenditures by borrowing. We show that if the elasticity of human capital to educational expenditure is great enough, the relationship between the tightness of the constraints and the growth rate is inverted-U shaped when the constraints are binding. Moreover, when the constraints cease to be binding, the growth rate is constant. We also show that a relaxation of the constraints cannot be Pareto improving even if the growth rate rises.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176512003217
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 116 (2012)
Issue (Month): 3 ()
Pages: 575-578

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Handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:575-578

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Education; Borrowing constraints; Economic growth;

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  1. Hendricks, Lutz A., 1999. "Taxation and Long-Run Growth," Staff General Research Papers 11933, Iowa State University, Department of Economics.
  2. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, January.
  3. Robert J. Barro & Rachel McCleary, 2003. "Religion and Economic Growth," NBER Working Papers 9682, National Bureau of Economic Research, Inc.
  4. Akira Yakita, 2004. "School Loans, Subsidies, and Economic Growth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(2), pages 262-, August.
  5. David Croix & Philippe Michel, 2007. "Education and growth with endogenous debt constraints," Economic Theory, Springer, vol. 33(3), pages 509-530, December.
  6. Bacchetta, Philippe & Aghion, Philippe & Banerjee, Abhijit, 2004. "Financial Development and the Instability of Open Economies," Scholarly Articles 4554209, Harvard University Department of Economics.
  7. Hung-ju Chen, 2003. "Educational Systems, Growth and Income Distribution: A Quantitative Study," Computing in Economics and Finance 2003 13, Society for Computational Economics.
  8. Buiter, Willem H & Kletzer, Kenneth, 1995. "Capital Mobility, Fiscal Policy and Growth Under Self-Financing of Human Capital Formation," CEPR Discussion Papers 1179, C.E.P.R. Discussion Papers.
  9. John Laitner, 2000. "Earnings within Education Groups and Overall Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 807-832, August.
  10. Hendricks, Lutz, 1999. "Taxation and long-run growth1," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 411-434, April.
  11. Jappelli, Tullio & Pagano, Marco, 1992. "Saving, Growth and Liquidity Constraints," CEPR Discussion Papers 662, C.E.P.R. Discussion Papers.
  12. Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-50, April.
  13. Rangazas, Peter, 2000. "Schooling and economic growth: A King-Rebelo experiment with human capital," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 397-416, October.
  14. De Gregorio, Jose, 1996. "Borrowing constraints, human capital accumulation, and growth," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 49-71, February.
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