On The Interaction Between Education And Social Security
AbstractThis paper uses an overlapping generations model with endogenous fertility choices to analyze the quantitative costs and benefits of subsidizing higher education, paying particular attention to the interaction between such policy and the sustainability of the social security system. The paper focuses on the demographic change as the mechanism that link both policies. It is found that an increase in education subsidies changes the educational composition of the population and lowers average fertility. Lower average fertility and higher life expectancy of educated individuals translates into changes in the age structure of the population that requires an increase in the social security tax rate in order to balance the pension budget. Such process reduces the welfare benefits of this educational policy since the rise in social security taxes lowers the after-tax lifetime earnings of almost all individuals born in the period of the policy reform and over.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we033511.
Date of creation: Jul 2003
Date of revision:
Other versions of this item:
- Juan A. Rojas, 2004. "On the Interaction between Education and Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 932-957, October.
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
- J10 - Labor and Demographic Economics - - Demographic Economics - - - General
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