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Self-Enforcing Intergenerational Transfers and the Provision of Education

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  • Anderberg, Dan
  • Balestrino, Alessandro

Abstract

Due to the presence of borrowing constraints in the market, the cost of educating the young members of a family is often borne by the adults. We consider intrafamily financing of human capital under the assumptions that individuals are selfish and binding contracts are not feasible. Cooperation among family members is possible through a family norm (a family ‘social capital’) which prescribes the obligations to be met at each stage in life and sanctions for those who deviate. We note that it is crucial that transfers to education are combined with intrafamily transfers to old-family members. We characterise the set of self-enforcing transfers and show that there is a downward bias in the family provision of education. This gives a rationale for public action as a remedy to the lack of commitment between selfish family members. The analysis also points to a number of potential effects of education policy and public pensions on human capital formation.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3107.

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Date of creation: Dec 2001
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Handle: RePEc:cpr:ceprdp:3107

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Keywords: education policy; human capital investments; intergenerational trade; self-enforceable transfers;

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Citations

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Cited by:
  1. Dan Anderberg & Alessandro Balestrino, 2007. "Non-cooperative Households and the Size and Composition of Public Expenditure," Economics of Governance, Springer, vol. 8(1), pages 61-81, January.
  2. Alessandro Balestrino & Cinzia Ciardi, 2007. "Social Norms, Cognitive Dissonance and the Timing of Marriage," CESifo Working Paper Series 2068, CESifo Group Munich.
  3. Xu, Zeyu, 2007. "A survey on intra-household models and evidence," MPRA Paper 3763, University Library of Munich, Germany.
  4. Wildman, John & Hollingsworth, Bruce, 2009. "Blood donation and the nature of altruism," Journal of Health Economics, Elsevier, vol. 28(2), pages 492-503, March.
  5. Alessandro Balestrino & Lisa Grazzini & Annalisa Luporini, 2013. "A Normative Justification of Compulsory Education," Working Papers - Economics wp2013_18.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  6. Gradstein, Mark, 2010. "Social Insurance, Education, and Work Ethics," CEPR Discussion Papers 7838, C.E.P.R. Discussion Papers.
  7. Raut, Lakshmi K. & Tran, Lien H., 2005. "Parental human capital investment and old-age transfers from children: Is it a loan contract or reciprocity for Indonesian families?," Journal of Development Economics, Elsevier, vol. 77(2), pages 389-414, August.
  8. Haizhen Mou & Stanley L. Winer, 2012. "Fiscal Incidence when both Individual Welfare and Family Structure Matter: The Case of Subsidization of Home-Care for the Elderly," CESifo Working Paper Series 3731, CESifo Group Munich.

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