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Investments into Education - Doing as the Parents Did

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  • Kirchsteiger, Georg
  • Sebald, Alexander

Abstract

Empirical evidence suggests that parents with higher levels of education generally also attach a higher importance to the education of their children. This implies an intergenerational chain transmitting the attitude towards the formation of human capital from one generation to the next. We incorporate this intergenerational chain into an OLG-model with endogenous human capital formation. In absence of any state intervention such an economy might be characterized by multiple steady states. A temporary public investment into human capital formation is then needed for a transition from a steady state with low human capital levels to one with a higher human capital level. Furthermore, it can be shown that even the best steady state is suboptimal when the human capital is privately provided. This inefficiency can be overcome by a permanent public subsidy for education.

Suggested Citation

  • Kirchsteiger, Georg & Sebald, Alexander, 2006. "Investments into Education - Doing as the Parents Did," CEPR Discussion Papers 5686, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5686
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    Cited by:

    1. Kirchsteiger, Georg & Sebald, Alexander, 2010. "Investments into education--Doing as the parents did," European Economic Review, Elsevier, vol. 54(4), pages 501-516, May.
    2. repec:zbw:rwirep:0318 is not listed on IDEAS
    3. Kunze, Lars, 2012. "Like Father, Like Son: Inheriting and Bequeathing," Ruhr Economic Papers 318, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Yoko Mimura, 2014. "Family Characteristics and Educational Expenditures in Japan and the United States," Japanese Economy, Taylor & Francis Journals, vol. 40(1), pages 5-28.
    5. Bonein, Aurélie & Serra, Daniel, 2007. "Another experimental look at reciprocal behavior: indirect reciprocity," MPRA Paper 3257, University Library of Munich, Germany, revised Mar 2007.
    6. Elvana Hana & Arsena Gjipali, 2010. "What Determines Upper Secondary School Participation? - Intergenerational Effects Of Education Outcomes In Albania," Journal Articles, Center For Economic Analyses, pages 17-31, June.
    7. Lars Kunze, 2012. "Like Father, Like Son: Inheriting and Bequeathing," Ruhr Economic Papers 0318, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    8. Gimenez-Nadal, J. Ignacio & Molina, José Alberto & Zhu, Yu, 2014. "Intergenerational Mobility of Housework Time in the United Kingdom," IZA Discussion Papers 8674, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    education subsidy; human capital formation; indirect reciprocity;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I2 - Health, Education, and Welfare - - Education

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