Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Long-run Effects of Household Liquidity Constraints and Taxation on Fertility, Education, Saving and Growth

Contents:

Author Info

  • Papagni, Erasmo

Abstract

This paper investigates economic growth under liquidity constraints by taking into account the choices of fertility, human capital and saving. In a model of four overlapping generations, parents are altruistic towards their offspring and finance their education investment. The government provides education subsidies to young adult parents and levies taxes on income of the adult generation. Sensitivity analysis on borrowing limits and tax parameters highlights effects with opposite sign on the main endogenous variables at steady state. A lift in liquidity constraints decreases savings and capital accumulation and this effect is responsible for the ambiguous sign of comparative statics on the rate of fertility and on human capital investment. From model simulation, we derive an inverted U-shaped curve relating the borrowing limit with fertility, education and growth, meaning that financial reforms in the less developed countries have positive effects on the economy in the long-run, even if they raise fertility and reduce savings. Greater government subsidies to human capital investments and lower income taxes have positive effects on savings and fertility. The same parameters present ambiguous effects on education investments and growth. Numerical simulations show that a) human capital investment has an inverted U-shaped relation with income taxes and education subsidies ; b) economic growth decreases with greater income taxes and increases with higher education subsidies. Jel codes: O40, O16, J13, D91.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/12793/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12793.

as in new window
Length:
Date of creation: May 2008
Date of revision:
Handle: RePEc:pra:mprapa:12793

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Borrowing constraints; taxation; endogenous population; economic growth;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. De Gregorio, Jose, 1996. "Borrowing constraints, human capital accumulation, and growth," Journal of Monetary Economics, Elsevier, Elsevier, vol. 37(1), pages 49-71, February.
  2. Robert Haveman & Barbara Wolfe, 1995. "The Determinants of Children's Attainments: A Review of Methods and Findings," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 33(4), pages 1829-1878, December.
  3. Becker, Gary S & Murphy, Kevin M & Tamura, Robert, 1990. "Human Capital, Fertility, and Economic Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages S12-37, October.
  4. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521001151.
  5. Azariadis, Costas & Bullard, James & Ohanian, Lee, 2004. "Trend-reverting fluctuations in the life-cycle model," Journal of Economic Theory, Elsevier, Elsevier, vol. 119(2), pages 334-356, December.
  6. Jappelli, Tullio & Pagano, Marco, 1995. "The Welfare Effects of Liquidity Constraints," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1108, C.E.P.R. Discussion Papers.
  7. David Andolfatto & Martin Gervais, 2004. "Human Capital Investment and Debt Constraints," Labor and Demography, EconWPA 0412006, EconWPA.
  8. Mark Pin & Shahidur Khandker & Signe-Mary Mckernan & M. Latif, 1999. "Credit programs for the poor and reproductive behavior in low-income countries: Are the reported causal relationships the result of heterogeneity bias?," Demography, Springer, Springer, vol. 36(1), pages 1-21, February.
  9. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
  10. José De Gregorio & Se-Jik Kim, 1998. "Credit Markets with Differences in Abilities: Education, Distribution, and Growth," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 42, Centro de Economía Aplicada, Universidad de Chile.
  11. Michele Boldrin & Mariacristina De Nardi & Larry E. Jones, 2005. "Fertility and Social Security," NBER Working Papers 11146, National Bureau of Economic Research, Inc.
  12. Costas Azariadis & Luisa Lambertini, 2003. "Endogenous Debt Constraints in Lifecycle Economies," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 461-487.
  13. Cox, Donald & Jappelli, Tullio, 1990. "Credit Rationing and Private Transfers: Evidence from Survey Data," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 445-54, August.
  14. Kehoe, Timothy J & Levine, David K, 1993. "Debt-Constrained Asset Markets," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(4), pages 865-88, October.
  15. William L. Parish & Robert J. Willis, 1993. "Daughters, Education, and Family Budgets Taiwan Experiences," Journal of Human Resources, University of Wisconsin Press, vol. 28(4), pages 863-898.
  16. David de la Croix & Matthias Doepke, 2002. "Public versus Private Education when Differential Fertility Matters," UCLA Economics Working Papers, UCLA Department of Economics 816, UCLA Department of Economics.
  17. Papagni, Erasmo, 2006. "Household borrowing constraints, fertility dynamics, and economic growth," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 30(1), pages 27-54, January.
  18. W.H. Buiter & K Kletzer, 1995. "Capital Mobility," CEP Discussion Papers, Centre for Economic Performance, LSE dp0245, Centre for Economic Performance, LSE.
  19. Jappelli, Tullio & Pagano, Marco, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(1), pages 83-109, February.
  20. Galor, Oded & Zang, Hyoungsoo, 1997. "Fertility, income distribution, and economic growth: Theory and cross-country evidence," Japan and the World Economy, Elsevier, Elsevier, vol. 9(2), pages 197-229, May.
  21. Willem H. Buiter & Kenneth M. Kletzer, 1995. "Capital Mobility, Fiscal Policy and Growth under Self-Financing of Human Capital Formation," NBER Working Papers 5120, National Bureau of Economic Research, Inc.
  22. Willis, Robert J, 1973. "A New Approach to the Economic Theory of Fertility Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(2), pages S14-64, Part II, .
  23. Oded Galor & David N. Weil, 1993. "The Gender Gap, Fertility, and Growth," NBER Working Papers 4550, National Bureau of Economic Research, Inc.
  24. David Croix & Philippe Michel, 2007. "Education and growth with endogenous debt constraints," Economic Theory, Springer, Springer, vol. 33(3), pages 509-530, December.
  25. Isaac Ehrlich & Jinyoung Kim, 2007. "Social Security and Demographic Trends: Theory and Evidence from the International Experience," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 55-77, January.
  26. Lance Lochner & Alexander Monge-Naranjo, 2002. "Human Capital Formation with Endogenous Credit Constraints," NBER Working Papers 8815, National Bureau of Economic Research, Inc.
  27. Oded Galor, 2005. "Discrete Dynamical Systems," GE, Growth, Math methods, EconWPA 0504001, EconWPA.
  28. Cigno, Alessandro & Rosati, Furio C., 1996. "Jointly determined saving and fertility behaviour: Theory, and estimates for Germany, Italy, UK and USA," European Economic Review, Elsevier, Elsevier, vol. 40(8), pages 1561-1589, November.
  29. Behrman, Jere R & Pollak, Robert A & Taubman, Paul, 1989. "Family Resources, Family Size, and Access to Financing for College Education," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(2), pages 398-419, April.
  30. Hanushek, Eric A, 1992. "The Trade-Off between Child Quantity and Quality," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(1), pages 84-117, February.
  31. Patricia Apps & Ray Rees, 2004. "Fertility, Taxation and Family Policy," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 106(4), pages 745-763, December.
  32. Jose De Gregorio & Se-Jik Kim, 1994. "Credit Markets with Differences in Abilities," IMF Working Papers, International Monetary Fund 94/47, International Monetary Fund.
  33. Schultz, T. Paul, 1993. "Demand for children in low income countries," Handbook of Population and Family Economics, Elsevier, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 8, pages 349-430 Elsevier.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:12793. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.