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Optimal Accumulation in an Endogenous Growth Setting with Human Capital

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Author Info

  • Docquier, Frédéric

    ()
    (Université catholique de Louvain)

  • Paddison, Oliver

    ()
    (ECLAC, Santiago de Chile)

  • Pestieau, Pierre

    ()
    (CREPP, Université de Liège)

Abstract

This paper considers a three-overlapping-generations model of endogenous growth wherein human capital is the engine of growth. It first contrasts the laissez-faire and the optimal solutions. Three possible accumulation regimes are distinguished. Then it discusses a standard set of tax-transfer instruments that allow for decentralization of the social optimum. Within the limits of our model, the rationale for the standard pattern of intergenerational transfers (the working-aged financing the education of the young and the pension of the old) is seriously questioned. On pure efficiency grounds, the case for generous public pensions is rather weak.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2081.

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Length: 24 pages
Date of creation: Apr 2006
Date of revision:
Publication status: published in: Journal of Economic Theory, 2006, 134 (1), 361-378
Handle: RePEc:iza:izadps:dp2081

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Keywords: endogenous growth; human capital; intergenerational transfers;

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  1. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  2. Jie Zhang & Junsen Zhang, 2004. "How does social security affect economic growth? Evidence from cross-country data," Journal of Population Economics, Springer, vol. 17(3), pages 473-500, 08.
  3. Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
  4. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  5. Barro, R. & Mankiw, G., 1992. "Capital Mobility in Neoclassical Models of Growth," Harvard Institute of Economic Research Working Papers 1615, Harvard - Institute of Economic Research.
  6. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521806428, October.
  7. Docquier, Frederic & Paddison, Oliver, 2003. "Social security benefit rules, growth and inequality," Journal of Macroeconomics, Elsevier, vol. 25(1), pages 47-71, March.
  8. Daniel Cohen & Marcelo Soto, 2007. "Growth and human capital: good data, good results," Journal of Economic Growth, Springer, vol. 12(1), pages 51-76, March.
  9. Docquier, Frederic & Michel, Philippe, 1999. " Education Subsidies, Social Security and Growth: The Implications of a Demographic Shock," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 425-40, September.
  10. Glomm, G. & Kaganovich, M., 1999. "Income Distribution Effects of Public Education and Social Security in a Growing Economy," Papers 9901, Michigan State - Econometrics and Economic Theory.
  11. Zhang, Jie, 1995. "Social security and endogenous growth," Journal of Public Economics, Elsevier, vol. 58(2), pages 185-213, October.
  12. Angel de la Fuente & Rafael Donénech, 2000. "Human Capital in Growth Regressions: How much Difference Does Data Quality Make?," OECD Economics Department Working Papers 262, OECD Publishing.
  13. Serge Coulombe & Jean-François Tremblay, 2004. "Literacy, Human Capital and Growth," Working Papers 0407E, University of Ottawa, Department of Economics.
  14. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  15. Michele Boldrin & Ana Montes, 2009. "Assessing the efficiency of public education and pensions," Journal of Population Economics, Springer, vol. 22(2), pages 285-309, April.
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