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Child Allowances, Educational Subsidies and Economic Growth

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  • Chen, Hung-Ju

Abstract

This paper examines the effects on economic growth attributable to government policies of child allowances and educational subsidies. We show that multiple steady states may arise under these two policies, with club convergence occurring, and the initial condition being of relevance, if the tax rate is fairly high. Under a policy of child allowances, an increase in the tax rate is found to raise the quantity of children, but lower the quality of adults; however, under a policy of educational subsidies, with an increase in the tax rate, corresponding increases are found in both the quantity of children and the quality of adults. We also find that considering the ‘threshold’ effects of technological externalities, an economy can escape the poverty trap if the threshold is sufficiently low. For developed countries, introducing child allowances may improve or hurt the welfare while introducing educational subsidies is welfare improving.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 51279.

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Date of creation: 07 Nov 2013
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Handle: RePEc:pra:mprapa:51279

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Keywords: Child allowances; Fertility; OLG; Skill.;

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  1. Hung-Ju Chen, 2010. "Life expectancy, fertility, and educational investment," Journal of Population Economics, Springer, Springer, vol. 23(1), pages 37-56, January.
  2. Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc.
  3. David de la Croix & Matthias Doepke, 2001. "Inequality and Growth: Why Differential Fertility Matters," UCLA Economics Working Papers, UCLA Department of Economics 803, UCLA Department of Economics.
  4. Hung-ju Chen, 2003. "Educational Systems, Growth and Income Distribution: A Quantitative Study," Computing in Economics and Finance 2003, Society for Computational Economics 13, Society for Computational Economics.
  5. van Groezen, Bas & Leers, Theo & Meijdam, Lex, 2003. "Social security and endogenous fertility: pensions and child allowances as siamese twins," Journal of Public Economics, Elsevier, Elsevier, vol. 87(2), pages 233-251, February.
  6. DE LA CROIX, David & DOEPKE, Matthias, . "Public versus private education when differential fertility matters," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1727, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Bas Groezen & Lex Meijdam, 2008. "Growing old and staying young: population policy in an ageing closed economy," Journal of Population Economics, Springer, Springer, vol. 21(3), pages 573-588, July.
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  9. Glomm, Gerhard, 1997. "Parental choice of human capital investment," Journal of Development Economics, Elsevier, Elsevier, vol. 53(1), pages 99-114, June.
  10. Bovenberg, A Lans & Jacobs, Bas, 2001. "Redistribution and Education Subsidies are Siamese Twins," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3099, C.E.P.R. Discussion Papers.
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  12. Fanti, Luciano & Gori, Luca, 2012. "A note on endogenous fertility, child allowances and poverty traps," Economics Letters, Elsevier, Elsevier, vol. 117(3), pages 722-726.
  13. 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.
  14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  15. Krueger, Alan B, 1993. "How Computers Have Changed the Wage Structure: Evidence from Microdata, 1984-1989," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(1), pages 33-60, February.
  16. Claudia Goldin & Lawrence F. Katz, 1996. "The Origins of Technology-Skill Complementarity," NBER Working Papers 5657, National Bureau of Economic Research, Inc.
  17. Jona Schellekens, 2009. "Family allowances and fertility: Socioeconomic differences," Demography, Springer, Springer, vol. 46(3), pages 451-468, August.
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  23. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Endogenous Fertility And The Design Of Family Taxation," CHILD Working Papers, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY wp03_00, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  24. Kimura, Masako & Yasui, Daishin, 2007. "Occupational choice, educational attainment, and fertility," Economics Letters, Elsevier, Elsevier, vol. 94(2), pages 228-234, February.
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  26. repec:dgr:uvatin:2005036 is not listed on IDEAS
  27. Charles F. Manski & Joram Mayshar, 2003. "Private Incentives and Social Interactions: Fertility Puzzles in Israel," Journal of the European Economic Association, MIT Press, MIT Press, vol. 1(1), pages 181-211, 03.
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