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.
Find related papers by JEL classification: D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
References listed on IDEAS 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.:
Barham, Vicky & Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1995.
"Education and the poverty trap,"
European Economic Review,
Elsevier, vol. 39(7), pages 1257-1275, August.
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BARHAM, Vicky & BOADWAY, Robin & MARCHAND, Maurice & PESTIEAU, Pierre, 1992.
"Education and the poverty trap,"
CORE Discussion Papers
1992010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
Cited by: (explanations, 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.)