In their recent paper, Boldrin and Montes (2005) analyze the “return on human capital investment” theory and show that if borrowing for education is not possible, then a combined public education and pension system that uses lump sum taxes and transfers can replicate the first-best decentralized allocation achieved in an economy without taxes where borrowing for human capital accumulation (education) is allowed. Taking into account that such borrowing is either absent or inefficient in many countries, a combined public education/public pensions scheme in such countries might prove to be welfare enhancing. Guided by this theoretical framework, we calibrate the parameters of an interconnected pension and education system for the Czech Republic under different demographic scenarios and fiscal rules. We also model the impact of an increase in the retirement age and of a hypothetical imbalance of pensions or educational transfers.
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Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number
wp326.
Find related papers by JEL classification: H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions I22 - Health, Education, and Welfare - - Education - - - Educational Finance I28 - Health, Education, and Welfare - - Education - - - Government Policy J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends and Forecasts J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
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