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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 also 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. A temporary public investment into human capital formation is then needed for a transition from a steady state with low human capital levels to one with a higher human capital level. Furthermore, it can be shown that even the best steady state is suboptimal when the human capital is privately provided. This inefficiency can be overcome by a permanent public subsidy for education.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5686.

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Date of creation: May 2006
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Handle: RePEc:cpr:ceprdp:5686

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Keywords: education subsidy; human capital formation; indirect reciprocity;

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  1. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1985. "The Strategic Bequest Motive," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1045-76, December.
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  7. Engelmann, Dirk & Fischbacher, Urs, 2009. "Indirect reciprocity and strategic reputation building in an experimental helping game," Games and Economic Behavior, Elsevier, vol. 67(2), pages 399-407, November.
  8. 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).
  9. Bruce Sacerdote, 2002. "The Nature and Nurture of Economic Outcomes," American Economic Review, American Economic Association, vol. 92(2), pages 344-348, May.
  10. Galor, Oded & Tsiddon, Daniel, 1997. " The Distribution of Human Capital and Economic Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 93-124, March.
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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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