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Educaiton choices, longevity and optimal policy in a Ben-Porath economy

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  • Yukihiro Nishimura
  • Pierre Pestieau
  • Gregory Ponthiere

Abstract

We develop a 3-period overlapping generations (OLG) model where individuals borrow at the young age to finance their education. Education does not only increase future wages, but, also, raises the duration of life, which, in turn, affects education choices, in line with Ben Porath (1967). We first identify conditions that guarantee the existence of a stationary equilibrium with perfect foresight. Then, we reexamine the conditions under which the Ben-Porath effect prevails, and emphasize the impact of human capital decay and preferences. We compare the laissez-faire with the social optimum, and show that the latter can be decentralized provided the laissez-faire capital stock corresponds to the one satisfying the modified Golden Rule. Finally, we introduce intracohort heterogeneity in the learning ability, and we show that, under asymmetric information, the second-best optimal non-linear tax scheme involves a downward distortion in the level of education of less able types, which, quite paradoxically, would reinforce the longevity gap in comparison with the laissez-faire.
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Suggested Citation

  • Yukihiro Nishimura & Pierre Pestieau & Gregory Ponthiere, 2018. "Educaiton choices, longevity and optimal policy in a Ben-Porath economy," LIDAM Reprints CORE 3012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:3012
    Note: In : Mathematical Social Sciences, 94, 65-81, 2018
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    Cited by:

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    2. Akira Momota, 2022. "Long lifespan and optimal recurrent education," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 1193-1222, May.
    3. Pestieau, Pierre & Ponthiere, Gregory, 2016. "Longevity Variations And The Welfare State," Journal of Demographic Economics, Cambridge University Press, vol. 82(2), pages 207-239, June.
    4. Xiao, Bowen & Fan, Ying & Guo, Xiaodan & Xiang, Lin, 2022. "Re-evaluating environmental tax: An intergenerational perspective on health, education and retirement," Energy Economics, Elsevier, vol. 110(C).
    5. Cipriani, Giam Pietro & Fioroni, Tamara, 2022. "Social security and endogenous demographic change: child support and retirement policies," Journal of Pension Economics and Finance, Cambridge University Press, vol. 21(3), pages 307-325, July.
    6. Cipriani, Giam Pietro & Fioroni, Tamara, 2021. "Endogenous Demographic Change, Retirement, And Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 609-631, April.

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