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Optimal education policies under endogenous borrowing constraints

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  • Min Wang

Abstract

This paper studies optimal education policies under endogenous borrowing constraints in a standard life-cycle model. In a closed economy, a policy that appropriately bundles an education subsidy with an old-age pension can restore the complete market allocation. Such a policy also removes persistent indeterminacies and endogenous fluctuations that exist in its absence. In a small open economy, a similar policy may restore the complete market allocation for a wide range of parameters, a range much wider than previously believed. These results broaden the rationale for a two-armed welfare state (education and pension) to a large class of economies. Copyright Springer-Verlag Berlin Heidelberg 2014

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  • Min Wang, 2014. "Optimal education policies under endogenous borrowing constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(1), pages 135-159, January.
    • Handle: RePEc:spr:joecth:v:55:y:2014:i:1:p:135-159
    DOI: 10.1007/s00199-013-0743-5
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    References listed on IDEAS

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    Cited by:

    1. Miyazaki, Koichi, 2016. "Student loans, fertility, and economic growth," MPRA Paper 71604, University Library of Munich, Germany.
    2. 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.
    3. Torben Andersen & Joydeep Bhattacharya, 2020. "Intergenerational Debt Dynamics Without Tears," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 192-219, January.
    4. Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2020. "On government-created credit markets for education and endogenous growth," Economic Modelling, Elsevier, vol. 92(C), pages 170-179.
    5. Bishnu, Monisankar & Wang, Min, 2017. "The political intergenerational welfare state," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 93-110.
    6. Torben M. Andersen & Joydeep Bhattacharya, 2017. "The Intergenerational Welfare State and the Rise and Fall of Pay‐as‐you‐go Pensions," Economic Journal, Royal Economic Society, vol. 127(602), pages 896-923, June.
    7. Florin Bidian & Camelia Bejan, 2015. "Martingale properties of self-enforcing debt," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(1), pages 35-57, September.
    8. Amol Amol & Monisankar Bishnu & Tridip Ray, 2023. "Pension, possible phaseout, and endogenous fertility in general equilibrium," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 376-406, April.
    9. Joydeep Bhattacharya & Monisankar Bishnu & Min Wang, 2023. "Credit Markets with time-inconsistent agents and strategic loan default," Discussion Papers 23-01, Indian Statistical Institute, Delhi.
    10. Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2019. "Public education, intergenerational transfers, and fertility," Economics Letters, Elsevier, vol. 179(C), pages 78-82.

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    More about this item

    Keywords

    Borrowing constraints; Incentive compatibility; Education; Intergenerational transfer; E62; H52; H55; I28; O16;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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