Education policy in a general equilibrium model with heterogeneous agents
This paper studies the impact of public intervention on educationfinance and economic growth in general equilibrium. I use a 3period overlapping generations model where human capitalinvestment is risky and individuals are heterogeneous with respectto their learning abilities. I show that subsidization of privatespending on education leads to a higher economic growth than purepublic education in the short run if initial inequality issufficiently low and in the long run if the dispersion of learningabilities is sufficiently low. The determination of the politicalequilibrium shows that there can exist a conflict betweendemocracy and economic growth.
Volume (Year): 9 (2007)
Issue (Month): 1 ()
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