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Growth dynamics and education spending: The role of inherited tastes and abilities

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  • de la Croix, David

Abstract

We present an overlapping generations model with endogenous growth in which children inherit from the previous generation human capital and life standard aspirations. Adults evaluate their own consumption with respect to a baseline requirement which depends on their parents past consumption. The presence of bequeathed tastes changes significantly the dynamic properties of the model. First, starting with too high aspirations or with too low education spendings lead the economy to a poverty trap. Second, the economy can be characterized by oscillations because inherit human capital may not be sufficient to cover the bequest in terms of higher aspirations. Third, the endogenous growth steady state can be surrounded by a repelling cycle which delimits an attraction basin.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 45 (2001)
Issue (Month): 8 (August)
Pages: 1415-1438

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Handle: RePEc:eee:eecrev:v:45:y:2001:i:8:p:1415-1438

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  1. de la Croix, David & Monfort, Philippe, 1999. "Education Funding and Regional Convergence," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999010, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. David DE LA CROIX & Philippe MICHEL, 2001. "Altruism and Self-Restraint," Annales d'Economie et de Statistique, ENSAE, issue 63-64, pages 233-259.
  3. Croix,David,de la & Urbain,Jean-Pierre, 1996. "Intertemporal substitution in import demand and habit formation ," Research Memorandum 003, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
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  12. de la Croix, David, 1998. "Growth and the relativity of satisfaction," Mathematical Social Sciences, Elsevier, vol. 36(2), pages 105-125, September.
  13. de la Croix, David, 1996. "The dynamics of bequeathed tastes," Economics Letters, Elsevier, vol. 53(1), pages 89-96, October.
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Citations

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Cited by:
  1. Michael Neugart & Jan Tuinstra, 2003. "Endogenous fluctuations in the demand for education," Journal of Evolutionary Economics, Springer, vol. 13(1), pages 29-51, 02.
  2. Jordi Caballé & Ana Moro-Egido, 2008. "The Effect of Aspirations, Habits, and Social Security on the Distribution of Wealth," UFAE and IAE Working Papers 761.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. ARTIGE, Lionel & CAMACHO, Carmen & DE LA CROIX, David, . "Wealth breeds decline: reversals of leadership and consumption habits," CORE Discussion Papers RP -1743, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Rosenblatt-Wisch, Rina, 2008. "Loss aversion in aggregate macroeconomic time series," European Economic Review, Elsevier, vol. 52(7), pages 1140-1159, October.
  5. Rillaers, Alexandra, 1998. "Growth and Human Capital Accumulation under Uncertainty," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998020, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  6. Lyons, Sean & Mayor, Karen & Tol, Richard S.J., 2009. "Convergence of consumption patterns during macroeconomic transition: A model of demand in Ireland and the OECD," Economic Modelling, Elsevier, vol. 26(3), pages 702-714, May.
  7. Toni Mora, 2005. "Conditioning factors on regional European clubs - a distributional approach," ERSA conference papers ersa05p302, European Regional Science Association.
  8. Gori, Luca & Sodini, Mauro, 2012. "Indeterminacy and nonlinear dynamics in an OLG growth model with endogenous labour supply and inherited tastes," MPRA Paper 35942, University Library of Munich, Germany.

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