Optimal education and pensions in an endogenous growth model
It is well known that, in OLG economies with life-cycle saving and exogenous growth, competitive equilibria will in general fail to achieve optimality and may even be dynamically inefficient. This is a consequence of individuals accumulating amounts of physical capital that differ from the level which would maximize welfare along a balanced growth path (the Golden Rule). With human capital, a second potential source of departure from optimality arises, to wit: individuals may not choose the correct amount of education investment. However, the Golden Rule concept, widely used in exogenous growth frameworks, has not found its way into endogenous growth models. In this paper, we propose to recover the Golden Rule of physical and also human capital accumulation. The optimal policy to decentralize the Golden Rule balanced growth path when there are no constraints for individuals to finance their education investments is also characterized. It is shown that it involves positive pensions and negative education subsidies (i.e., taxes)
|Date of creation:||01 Dec 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +32 10474304
Web page: http://www.uclouvain.be/coreEmail:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Samuelson, Paul A, 1975. "Optimum Social Security in a Life-Cycle Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 539-44, October.
- Michele Boldrin & Ana Montes, 2004.
"The intergenerational state: education and pensions,"
336, Federal Reserve Bank of Minneapolis.
- Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 651-664.
- Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Docquier, Frédéric & Paddison, Oliver & Pestieau, Pierre, 2006.
"Optimal Accumulation in an Endogenous Growth Setting with Human Capital,"
IZA Discussion Papers
2081, Institute for the Study of Labor (IZA).
- Docquier, Frederic & Paddison, Oliver & Pestieau, Pierre, 2007. "Optimal accumulation in an endogenous growth setting with human capital," Journal of Economic Theory, Elsevier, vol. 134(1), pages 361-378, May.
- Frederic, DOCQUIER & Oliver, Paddison & Pierre PESTIEAU, 2006. "Optimal accumulation in an endogenous growth setting with human capital," Discussion Papers (ECON - Département des Sciences Economiques) 2006022, Université catholique de Louvain, Département des Sciences Economiques.
- DOCQUIER, Frédéric & PADDISON, Oliver & PESTIEAU, Pierre, . "Optimal accumulation in an endogenous growth setting with human capital," CORE Discussion Papers RP -2021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Sergio Rebelo, 1999.
"Long Run Policy Analysis and Long Run Growth,"
Levine's Working Paper Archive
2114, David K. Levine.
- DEL REY, Elena & LOPEZ-GARCIA, Miguel ANgel, 2010.
"On welfare criteria and optimality in an endogenous growth model,"
CORE Discussion Papers
2010024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Elena Del Rey & Miguel-Angel Lopez-Garcia, 2012. "On Welfare Criteria and Optimality in an Endogenous Growth Model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(6), pages 927-943, December.
- Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
- Barro, R.J., 1988.
"Government Spending In A Simple Model Of Endogenous Growth,"
RCER Working Papers
130, University of Rochester - Center for Economic Research (RCER).
- Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
- Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
- Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-37, October.
- Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
- Samuelson, Paul A, 1975. "The Optimum Growth Rate for Population," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 531-38, October.
- Caballe, J., 1991.
"Endogeneous Growth, Human Capital and Bequests in a Life-Cycle Model,"
UFAE and IAE Working Papers
158.91, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Caballe, Jordi, 1995. "Endogenous Growth, Human Capital, and Bequests in a Life-Cycle Model," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 156-81, January.
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2009079. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)
If references are entirely missing, you can add them using this form.