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Education, borrowing constraints and growth

  • Kitaura, Koji

This paper studies the effects of educational borrowing constraints on economic growth and welfare. We consider a three-period-lived overlapping generations model in which individuals finance their educational expenditures by borrowing. We show that if the elasticity of human capital to educational expenditure is great enough, the relationship between the tightness of the constraints and the growth rate is inverted-U shaped when the constraints are binding. Moreover, when the constraints cease to be binding, the growth rate is constant. We also show that a relaxation of the constraints cannot be Pareto improving even if the growth rate rises.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176512003217
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 116 (2012)
Issue (Month): 3 ()
Pages: 575-578

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Handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:575-578
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Akira Yakita, 2004. "School Loans, Subsidies, and Economic Growth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(2), pages 262-, August.
  2. Hendricks, Lutz, . "Taxation and Long-Run Growth," Working Papers 96/2, Arizona State University, Department of Economics.
  3. DE LA CROIX, David & MICHEL, Philippe, . "Education and growth with endogenous debt constraints," CORE Discussion Papers RP 1991, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Bacchetta, Philippe & Aghion, Philippe & Banerjee, Abhijit, 2004. "Financial Development and the Instability of Open Economies," Scholarly Articles 4554209, Harvard University Department of Economics.
  5. Willem H. Buiter & Kenneth M. Kletzer, 1995. "Capital Mobility, Fiscal Policy, and Growth under Self-Financing of Human Capital Formation," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 163-94, November.
  6. Jappelli, Tullio & Pagano, Marco, 1992. "Saving, Growth and Liquidity Constraints," CEPR Discussion Papers 662, C.E.P.R. Discussion Papers.
  7. John Laitner, 2000. "Earnings within Education Groups and Overall Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 807-832, August.
  8. Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-50, April.
  9. Hendricks, Lutz, 1999. "Taxation and long-run growth1," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 411-434, April.
  10. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, June.
  11. Chen, Hung-ju, 2005. "Educational systems, growth and income distribution: a quantitative study," Journal of Development Economics, Elsevier, vol. 76(2), pages 325-353, April.
  12. De Gregorio, Jose, 1996. "Borrowing constraints, human capital accumulation, and growth," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 49-71, February.
  13. Robert J. Barro & Rachel McCleary, 2003. "Religion and Economic Growth," NBER Working Papers 9682, National Bureau of Economic Research, Inc.
  14. repec:cup:cbooks:9780521001151 is not listed on IDEAS
  15. Rangazas, Peter, 2000. "Schooling and economic growth: A King-Rebelo experiment with human capital," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 397-416, October.
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