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Growth dynamics and education spending: The role of inherited tastes and abilities

  • de la Croix, David

We present an overlapping generations model with endogenous growth in which children inherit from the previous generation human capital and life standard aspirations. Adults evaluate their own consumption with respect to a baseline requirement which depends on their parents past consumption. The presence of bequeathed tastes changes significantly the dynamic properties of the model. First, starting with too high aspirations or with too low education spendings lead the economy to a poverty trap. Second, the economy can be characterized by oscillations because inherit human capital may not be sufficient to cover the bequest in terms of higher aspirations. Third, the endogenous growth steady state can be surrounded by a repelling cycle which delimits an attraction basin.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 45 (2001)
Issue (Month): 8 (August)
Pages: 1415-1438

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Handle: RePEc:eee:eecrev:v:45:y:2001:i:8:p:1415-1438
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  8. de la Croix, David & Michel, Philippe, 1997. "Altruism and self-refrain," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998010, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Apr 1998.
  9. Solomou, Solomos, 1986. "Non-Balanced Growth and Kondratieff Waves in the World Economy, 1850–1913," The Journal of Economic History, Cambridge University Press, vol. 46(01), pages 165-169, March.
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  13. de la Croix, David & Urbain, Jean-Pierre, 1996. "Intertemporal Substitution in Import Demand and Habit Formation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1996002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  14. de la Croix, David, 1996. "The dynamics of bequeathed tastes," Economics Letters, Elsevier, vol. 53(1), pages 89-96, October.
  15. Nehru, Vikram & Swanson, Eric & Dubey, Ashutosh, 1995. "A new database on human capital stock in developing and industrial countries: Sources, methodology, and results," Journal of Development Economics, Elsevier, vol. 46(2), pages 379-401, April.
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  17. de la Croix, David, 1995. "Economic Growth and the Relativity of Satisfaction," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1995023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  18. van Ewijk, Casper, 1982. "A Spectral Analysis of the Kondratieff-Cycle," Kyklos, Wiley Blackwell, vol. 35(3), pages 468-99.
  19. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
  20. Benhabib, Jess & Gali, Jordi, 1995. "On growth and indeterminacy: some theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 163-211, December.
  21. de la Croix, David & Monfort, Philippe, 1999. "Education Funding and Regional Convergence," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999010, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  22. Lucas, Robert E, Jr, 1993. "Making a Miracle," Econometrica, Econometric Society, vol. 61(2), pages 251-72, March.
  23. Clark, Andrew E. & Oswald, Andrew J. & Warr, Peter B., 1994. "Is job satisfaction u-shaped in age ?," CEPREMAP Working Papers (Couverture Orange) 9407, CEPREMAP.
  24. Alex Michalos, 1980. "Satisfaction and happiness," Social Indicators Research- An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 8(4), pages 385-422, December.
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