Altruism and private investment in human capital

We developed a dynamic deterministic general equilibrium model that explains human capital accumulation through schooling. The model is characterized by altruism in the sense parents, caring about the welfare of their young children, impart them freely some knowledge and help them financially. The education regime is private and features distinguishing our model are: (1) the young households are economically active and (2) allocating time to schooling or labor causes disutility. We calibrated the model to some balanced growth facts. We show that the assumption that students are not economically active is at odds with observations and distorts the available estimators of the threshold level of altruism. According to our comparison of equilibria, students can incur debts, even when parent-to-child altruism is above its threshold level. Besides, they increase their labor supply and decrease curricular activities, as the level of altruism declines. We have also simulated our model to investigate the impacts of the tuition fees rate and the ability to learn. When the tuition fees rises, on impact, the young substitute labor for education. But, in the long-run, the time allocated to education rises back towards its initial level. The physical capital stock and output remain higher. An improvement in the ability to learn generates qualitatively the opposite effects. Finally, we have used our findings to provide answers to some questions raised by the student crisis known as Maple Spring that Quebec experienced following the decision of the government to increase tuition.