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Education, borrowing constraints and growth

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  • Kitaura, Koji

Abstract

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.

Suggested Citation

  • Kitaura, Koji, 2012. "Education, borrowing constraints and growth," Economics Letters, Elsevier, vol. 116(3), pages 575-578.
    • Handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:575-578
    DOI: 10.1016/j.econlet.2012.05.053
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    Cited by:

    1. Abida Naurin & Panayiotis M. Pourpourides, 2023. "On the causality between household and government spending on education: evidence from a panel of 40 countries," Empirical Economics, Springer, vol. 65(2), pages 567-585, August.
    2. Michael Hatcher & Panayiotis M. Pourpourides, 2023. "Does the impact of private education on growth differ at different levels of credit market development?," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 291-322, February.
    3. Bhattacharya, Joydeep & Qiao, Xue & Wang, Min, 2016. "Endogenous Borrowing Constraints And Wealth Inequality," Macroeconomic Dynamics, Cambridge University Press, vol. 20(6), pages 1413-1431, September.
    4. Miyazaki, Koichi, 2016. "Student loans, fertility, and economic growth," MPRA Paper 71604, University Library of Munich, Germany.
    5. Ryota Nakano, 2024. "Intergenerational Mobility and Student Loans," ISER Discussion Paper 1248, Institute of Social and Economic Research, Osaka University.
    6. Takayuki Ogawa & Hiroaki Ohno, 2024. "Hyperbolic discounting and state‐dependent commitment," Economica, London School of Economics and Political Science, vol. 91(362), pages 414-445, April.
    7. Hatcher, Michael, 2022. "Education, borrowing constraints and growth: A note," Economics Letters, Elsevier, vol. 212(C).

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    More about this item

    Keywords

    Education; Borrowing constraints; Economic growth;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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