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On welfare criteria and optimality in an endogenous growth model


  • DEL REY, Elena

    () (Universitat de Girona, Spain)

  • LOPEZ-GARCIA, Miguel ANgel

    () (Universitat Autonoma de Barcelona, Spain)


In this paper we explore the consequences for optimality of a social planner adopting two different welfare criteria. The framework of analysis is an OLG model with physical and human capital. We first show that, when the SWF is a discounted sum of individual utilities defined over consumption per unit of natural labour, the precise cardinalization of the individual utility function becomes crucial for the characterization of the social optimum. Also, decentralizing the social optimum requires an education subsidy. In contrast, when the SWF is a discounted sum of individual utilities defined over consumption per unit of efficient labour, the precise cardinalization of preferences becomes irrelevant. More strikingly, along the optimal growth path, education should be taxed.

Suggested Citation

  • 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).
  • Handle: RePEc:cor:louvco:2010024

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    References listed on IDEAS

    1. Sloan, Frank A & Norton, Edward C, 1997. "Adverse Selection, Bequests, Crowding Out, and Private Demand for Insurance: Evidence from the Long-Term Care Insurance Market," Journal of Risk and Uncertainty, Springer, vol. 15(3), pages 201-219, December.
    2. Duée, Michel & Rebillard, Cyril & Pennec, Sophie, 2005. "Les personnes dépendantes en France : Evolution et prise en charge
      [Old-age disability in France: Long-term evolution, private caregiving and public expenditure]
      ," MPRA Paper 69877, University Library of Munich, Germany.
    3. Norton, Edward C., 2000. "Long-term care," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 17, pages 955-994 Elsevier.
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    Cited by:

    1. Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2013. "Optimal education and pensions in an endogenous growth model," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1737-1750.
    2. Del Rey, Elena & Lopez-Garcia, Miguel-Angel, 2016. "Endogenous growth and welfare effects of education subsidies and intergenerational transfers," Economic Modelling, Elsevier, vol. 52(PB), pages 531-539.
    3. Torben M. Andersen & Joydeep Bhattacharya, 2013. "The Intergenerational Welfare State," CESifo Working Paper Series 4359, CESifo Group Munich.

    More about this item


    endogenous growth; human capital; intergenerational transfers; education policy;

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • 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

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