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Parents’ Investments and Education Returns

Author

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  • Francesc Dilmé

    (Department of Economics, University of Pennsylvania, 160 McNeil Building, 3718 Locust Walk Philadelphia, Pennsylvania 19104-6297)

Abstract

This paper analyses the relation between parents’ earnings and their children's education. In a context of perfect altruism, the model describes parents’ decisions on how much to consume and how much to invest in their children's education. The model predicts that returns on education in terms of wages should be linear. Using this model in a competitive economy, we show how the outcome depends on government subsidies or taxes on education. The usual tradeoff equality-efficiency arises in this context. Finally, the model provides some insights into the relation between education and productivity.

Suggested Citation

  • Francesc Dilmé, 2009. "Parents’ Investments and Education Returns," Cuadernos de Economía - Spanish Journal of Economics and Finance, ELSEVIER, vol. 32(89), pages 039-058, Mayo-Agos.
  • Handle: RePEc:cud:journl:v:32:y:2009:i:89:p:039-058
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    Keywords

    Intergenerational altruism; education returns.;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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