Fiscal Policy and Educational Attainment in the United States – A Generational Accounting Perspective
AbstractIn this paper, we investigate the consequences of the rise in educational attainment on the US generational accounts. We build on the 1995 accounts of Gokhale et al. (1999) and disaggregate them per schooling level. We show that low skill newborns are characterized by a negative generational account (-15.4% of their lifetime labor income) whilst medium and high skill newborns have positive accounts (26.8 and 32.3% of their lifetime labor income). Compared to Gokhale et al., our baseline forecast is more optimistic. Nevertheless, the rise in educational attainment is not strong enough to restore the generational balance. The current fiscal policy generates a long run deficit. Balancing the budget requires increasing taxes (by about 1.2%) or reducing transfers (by about 2.7%). These results are robust to growth and discounting assumptions, to the treatment of education spending. They are sensitive to assumptions about the schooling level of future generations.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1040.
Length: 43 pages
Date of creation: Mar 2004
Date of revision:
Publication status: published in: Economica, 2007, 47 (294), 329-350
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Other versions of this item:
- Xavier Chojnicki & Frederic Docquier, 2007. "Fiscal Policy and Educational Attainment in the United States: A Generational Accounting Perspective," Economica, London School of Economics and Political Science, vol. 74(294), pages 329-350, 05.
- Xavier Chojnicki & Frederic Docquier, 2003. "Fiscal Policy and Educational Attainment in the United States - A Generational Accounting Perspective," Public Economics 0303002, EconWPA, revised 18 Mar 2004.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H6 - Public Economics - - National Budget, Deficit, and Debt
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-03-22 (All new papers)
- NEP-DEV-2004-03-22 (Development)
- NEP-PBE-2004-03-22 (Public Economics)
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