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The costs of education, longevity and the poverty of nations

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  • Ferreira, Pedro Cavalcanti
  • Pessôa, Samuel de Abreu

Abstract

This paper explores the distortions on the cost of education, associated with government policies and institutional factors, as an additional determinant of cross-country income differences. Agents are finitely lived and the model takes into account life-cycle features of human capital accumulation. There are two sectors, one producing goods and the other providing educational services. The model is calibrated and simulated for 89 economies. We find that human capital taxation has a relevant impact on incomes, which is amplified by its indirect effect on returns to physical capital. Life expectancy plays an important role in determining long-run output: the expansion of the population working life increases the present value of the flow of wages, which induces further human capital investment and raises incomes. Although in our simulations the largest gains are observed when productivity is equated across countries, changes in longevity and in the incentives to educational investment are too relevant to ignore.

Suggested Citation

  • Ferreira, Pedro Cavalcanti & Pessôa, Samuel de Abreu, 2003. "The costs of education, longevity and the poverty of nations," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 472, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  • Handle: RePEc:fgv:epgewp:472
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    References listed on IDEAS

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    8. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
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    Cited by:

    1. Michele Boldrin & Larry E. Jones & Aubhik Khan, 2005. "Three Equations Generating an Industrial Revolution?," Levine's Bibliography 784828000000000385, UCLA Department of Economics.
    2. Córdoba, Juan Carlos & Ripoll, Marla, 2013. "What explains schooling differences across countries?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 184-202.
    3. M. Ali Khan & Tapan Mitra, 2005. "On choice of technique in the Robinson-Solow-Srinivasan model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 1(2), pages 83-110.
    4. Pedro Cavalcanti Ferreira & Samuel Pessôa & Marcelo Rodrigues Dos Santos, 2011. "The Impact Of Aids On Income And Human Capital," Economic Inquiry, Western Economic Association International, vol. 49(4), pages 1104-1116, October.
    5. Marla, Ripoll & Juan, Cordoba, 2006. "The Role of Education in Development," MPRA Paper 1864, University Library of Munich, Germany, revised Feb 2007.

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