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Investments into education--Doing as the parents did

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  • Kirchsteiger, Georg
  • Sebald, Alexander

Abstract

Empirical evidence suggests that parents with higher levels of education generally attach a higher importance to the education of their children. This implies an intergenerational chain transmitting the attitude towards the formation of human capital from one generation to the next. We incorporate this intergenerational chain into an OLG-model with endogenous human capital formation. In absence of any state intervention such an economy might be characterized by multiple steady states with low or high human capital levels. There are also steady states where the population is permanently divided into different groups with differing human capital and welfare levels. Compulsory schooling is needed to overcome steady states with low human capital and welfare levels. Tax financed education subsidies can lead to further pareto-improvements.

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File URL: http://www.sciencedirect.com/science/article/B6V64-4XDCHRF-1/2/5ee4ea8ed6ebee7d388102660518a9e6
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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 54 (2010)
Issue (Month): 4 (May)
Pages: 501-516

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Handle: RePEc:eee:eecrev:v:54:y:2010:i:4:p:501-516

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

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Keywords: Human capital formation Illiterateness trap Compulsory schooling Education subsidy;

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References

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  1. Dirk Engelmann & Urs Fischbacher, . "Indirect Reciprocity and Strategic Reputation Building in an Experimental Helping Game," IEW - Working Papers 132, Institute for Empirical Research in Economics - University of Zurich.
  2. CHAMPARNAUD, Luc & GINSBURGH, Victor & MICHEL, Philippe, . "Can public arts education replace arts subsidization?," CORE Discussion Papers RP -2130, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Arrondel, L. & Masson, A., 1999. "Family Transfers Involving Three Generations," DELTA Working Papers 1999-16, DELTA (Ecole normale supérieure).
  4. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  5. Shleifer, Andrei & Summers, Lawrence H. & Bernheim, B. Douglas, 1986. "The Strategic Bequest Motive," Scholarly Articles 3721794, Harvard University Department of Economics.
  6. Galor, O. & Tsiddon, D., 1996. "The Distribution of Human Capital and Economic Growth," Papers 18-96, Tel Aviv - the Sackler Institute of Economic Studies.
  7. Bruce Sacerdote, 2000. "The Nature and Nurture of Economic Outcomes," NBER Working Papers 7949, National Bureau of Economic Research, Inc.
  8. Eckstein, Zvi & Zilcha, Itzhak, 1994. "The effects of compulsory schooling on growth, income distribution and welfare," Journal of Public Economics, Elsevier, vol. 54(3), pages 339-359, July.
  9. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-82, June.
  10. Margin Dufwenberg & Georg Kirchsteiger, 2001. "A Theory of Sequential Reciprocity," Levine's Working Paper Archive 563824000000000090, David K. Levine.
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  12. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
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Cited by:
  1. Lars Kunze, 2012. "Like Father, Like Son: Inheriting and Bequeathing," Ruhr Economic Papers 0318, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Bonein Aurélie & Serra Daniel, 2007. "Another experimental look at reciprocal behavior: indirect reciprocity," Working Papers 07-04, LAMETA, Universtiy of Montpellier, revised Apr 2007.

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