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Parents Investments and Education Returns

  • Francesc Dilme

    (Universitat de Barcelona)

Registered author(s):

    This paper analyses the relation between parents earnings and their childrens education. In a context of perfect altruism, the model describes parents decisions on how much to consume and how much to invest in their childrens education. The model predicts that returns on education in terms of wages should be linear. Using this model in a competitive economy, we show how the outcome depends on government subsidies or taxes on education. The usual tradeoff equality-efficiency arises in this context. Finally, the model provides some insights into the relation between education and productivity.

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    Paper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 194.

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    Length: 25 pages
    Date of creation: 2008
    Date of revision:
    Handle: RePEc:bar:bedcje:2008194
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    Espai de Recerca en Economia, Facultat de Ciències Econòmiques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.

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    1. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-32, August.
    2. George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, vol. 12(2), pages 111-134.
    3. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
    4. Laitner, John & Juster, F Thomas, 1996. "New Evidence on Altruism: A Study of TIAA-CREF Retirees," American Economic Review, American Economic Association, vol. 86(4), pages 893-908, September.
    5. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
    6. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1985. "The Strategic Bequest Motive," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1045-76, December.
    7. Steven N. Durlauf, 1992. "A Theory of Persistent Income Inequality," NBER Working Papers 4056, National Bureau of Economic Research, Inc.
    8. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
    9. Burbidge, John B, 1983. "Government Debt in an Overlapping-Generations Model with Bequests and Gifts," American Economic Review, American Economic Association, vol. 73(1), pages 222-27, March.
    10. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    11. Kerwin Kofi Charles & Erik Hurst, 2002. "The Correlation of Welath Across Generations," NBER Working Papers 9314, National Bureau of Economic Research, Inc.
    12. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    13. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
    14. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
    15. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December.
    16. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
    17. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
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