Linking consumption externalities with optimal accumulation of human and physical capital and intergenerational transfers
AbstractThis paper opens a new perspective from which one can explain the presence of government intervention in education even in the absence of human capital externality. It argues that consumption externalities can provide rationale for government intervention in education. Within the context of overlapping generations economy, it has also been shown that competitive equilibrium either underaccumulates both physical and human capital or overaccumulates both. Thus the result rules out the possibility of competitive equilibrium deviating from the social optimum in its allocation of physical and human capital in opposite directions. Immediate policy issues have also been discussed.
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Bibliographic InfoPaper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 11-01.
Length: 32 pages
Date of creation: Jan 2011
Date of revision:
Consumption externality; human capital; education subsidy;
Other versions of this item:
- Bishnu, Monisankar, 2013. "Linking consumption externalities with optimal accumulation of human and physical capital and intergenerational transfers," Journal of Economic Theory, Elsevier, vol. 148(2), pages 720-742.
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- 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
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