Investment in Human Capital in a Macrodynamic Framework: Redistributive Taxation, Public Debt and Welfare
Efficient investment in human capital is a subject of great concern among economists. By means of an overlapping-generations macrodynamic model with credit constraints, imperfect insurance and exogenous labor supply, we appraise inefficiencies related to misinvestment in human capital and propose a simple scheme of redistributive taxation to mitigate them. A numerical simulation is calibrated in order to match stylized facts of Brazilian economy and shows that, in steady-state, with a flat-tax mechanism and lump-sum transfers, government intervention is beneficial to the extent it maximizes our utilitarian measure of welfare and reduces both inefficiency associated with misdirected investment in human capital and standard inequality indexes. After considering the possibility of decomposing our utilitarian measure of welfare and of allowing for public debt, we show that reduced inequality is the driving force which accounts for welfare improvement and that public debt plays no role. Robustness analysis shows that endogenizing labor supply does not lead to substantial changes in previous results
|Date of creation:||11 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
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.:
- S. Rao Aiyagari & Jeremy Greenwood & Ananth Seshadri, 2001.
"Efficient Investment in Children,"
RCER Working Papers
481, University of Rochester - Center for Economic Research (RCER).
- S. Rao Aiyagari & Jeremy Greenwood & Ananth Seshadri, 1999. "Efficient investment in children," Discussion Paper / Institute for Empirical Macroeconomics 132, Federal Reserve Bank of Minneapolis.
- S. Rao Aiyagari & Jeremy Greenwood & Ananth Seshadri, 2001. "Efficient investment in children," Working Paper 0105, Federal Reserve Bank of Cleveland.
- Gomes, Joao & Greenwood, Jeremy & Rebelo, Sergio, 2001.
Journal of Monetary Economics,
Elsevier, vol. 48(1), pages 109-152, August.
- Gomes, Joao F & Greenwood, Jeremy & Rebelo, Sérgio, 1997. "Equilibrium Unemployment," CEPR Discussion Papers 1602, C.E.P.R. Discussion Papers.
- Joao Gomes & Jeremy Greenwood & Sergio Rebelo, 1997. "Equilibrium Unemployment," NBER Working Papers 5922, National Bureau of Economic Research, Inc.
- Joao Gomes & Jeremy Greenwood & Sergio T. Rebelo, 2001. "Equilibrium Unemployment," RCER Working Papers 479, University of Rochester - Center for Economic Research (RCER).
- Lance Lochner & Alexander Monge-Naranjo, 2002. "Human Capital Formation with Endogenous Credit Constraints," NBER Working Papers 8815, National Bureau of Economic Research, Inc.
- S. Rao Aiyagari, 1993.
"Uninsured idiosyncratic risk and aggregate saving,"
502, Federal Reserve Bank of Minneapolis.
- Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
- Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
- Val, Paulo Rogério da Costa & Ferreira, Pedro Cavalcanti, 2002. "Modelos de ciclos reais de negócios aplicados à economis brasileira," Economics Working Papers (Ensaios Economicos da EPGE) 438, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Ferreira, Pedro Cavalcanti & Cunha, Bárbara Vasconcelos Boavista da, 2003. "Custo de ciclo econômico no Brasil em um modelo com restrição a crédito," Economics Working Papers (Ensaios Economicos da EPGE) 471, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
When requesting a correction, please mention this item's handle: RePEc:ecm:latm04:100. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.