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Public Expenditures on Education, Human Capital and Growth in Canada: An OLG Model Analysis

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  • Annabi, Nabil
  • Harvey, Simon
  • Lan, Yu

Abstract

This paper uses a computable overlapping-generations model (OLG) to investigate the dynamic effects of public investment in human capital in the Canadian context of population ageing. The decisions of time allocation between learning, working and leisure activity are endogenously determined in the model and react differently to tax policy changes. Learning time and public expenditures on education both improve human capital accumulation and effective labour supply. The simulation results indicate that a tax-financed increase in public spending on education may have significant crowding-out effects in the short run. In the long run, however, higher education incentives may increase the rate of human capital accumulation which in turn could mitigate the negative effects of population ageing. Furthermore, economic and welfare effects analysis shows that the impact depends on the distortions implied by alternative tax instruments and the productivity of public expenditures on education.

Suggested Citation

  • Annabi, Nabil & Harvey, Simon & Lan, Yu, 2008. "Public Expenditures on Education, Human Capital and Growth in Canada: An OLG Model Analysis," Conference papers 331686, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331686
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    Keywords

    Public Economics; Labor and Human Capital;

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