Optimal education and pensions in an endogenous growth model
AbstractIt is well known that, in OLG economies with life-cycle saving and exogenous growth, competitive equilibria will in general fail to achieve optimality and may even be dynamically inefficient. This is a consequence of individuals accumulating amounts of physical capital that differ from the level which would maximize welfare along a balanced growth path (the Golden Rule). With human capital, a second potential source of departure from optimality arises, to wit: individuals may not choose the correct amount of education investment. However, the Golden Rule concept, widely used in exogenous growth frameworks, has not found its way into endogenous growth models. In this paper, we propose to recover the Golden Rule of physical and also human capital accumulation. The optimal policy to decentralize the Golden Rule balanced growth path when there are no constraints for individuals to finance their education investments is also characterized. It is shown that it involves positive pensions and negative education subsidies (i.e., taxes)
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2009079.
Date of creation: 01 Dec 2009
Date of revision:
Contact details of provider:
Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
endogenous growth; human capital; intergenerational transfers; education policy;
Other versions of this item:
- Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2013. "Optimal education and pensions in an endogenous growth model," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1737-1750.
- D90 - Microeconomics - - Intertemporal Choice - - - General
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-DGE-2010-03-28 (Dynamic General Equilibrium)
- NEP-EDU-2010-03-28 (Education)
- NEP-FDG-2010-03-28 (Financial Development & Growth)
- NEP-HRM-2010-03-28 (Human Capital & Human Resource Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sergio T. Rebelo, 1992.
"Long Run Policy Analysis and Long Run Growth,"
NBER Working Papers
3325, National Bureau of Economic Research, Inc.
- Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
- Frederic, DOCQUIER & Oliver, Paddison & Pierre PESTIEAU, 2006.
"Optimal accumulation in an endogenous growth setting with human capital,"
Discussion Papers (ECON - DÃ©partement des Sciences Economiques)
2006022, Université catholique de Louvain, Département des Sciences Economiques.
- Docquier, Frederic & Paddison, Oliver & Pestieau, Pierre, 2007. "Optimal accumulation in an endogenous growth setting with human capital," Journal of Economic Theory, Elsevier, vol. 134(1), pages 361-378, May.
- Docquier, Frédéric & Paddison, Oliver & Pestieau, Pierre, 2006. "Optimal Accumulation in an Endogenous Growth Setting with Human Capital," IZA Discussion Papers 2081, Institute for the Study of Labor (IZA).
- DOCQUIER, Frédéric & PADDISON, Oliver & PESTIEAU, Pierre, . "Optimal accumulation in an endogenous growth setting with human capital," CORE Discussion Papers RP -2021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-37, October.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
- Michele Boldrin & Ana Montes, 2004.
"The intergenerational state: education and pensions,"
336, Federal Reserve Bank of Minneapolis.
- Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 651-664.
- Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers.
- Barro, R.J., 1988.
"Government Spending In A Simple Model Of Endogenous Growth,"
RCER Working Papers
130, University of Rochester - Center for Economic Research (RCER).
- Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
- Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
- Robert J. Barro, 1991. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
- Elena Del Rey & Miguel-Angel Lopez-Garcia, 2012.
"On Welfare Criteria and Optimality in an Endogenous Growth Model,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 14(6), pages 927-943, December.
- DEL REY, Elena & LOPEZ-GARCIA, Miguel ANgel, 2010. "On welfare criteria and optimality in an endogenous growth model," CORE Discussion Papers 2010024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Samuelson, Paul A, 1975. "The Optimum Growth Rate for Population," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 531-38, October.
- Samuelson, Paul A, 1975. "Optimum Social Security in a Life-Cycle Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 539-44, October.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Optimal education and pensions in an endogenous growth model
by Christian Zimmermann in NEP-DGE blog on 2010-03-29 18:22:20
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS).
If references are entirely missing, you can add them using this form.