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Optimal population and education

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  • Julio Davila

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

If raising and educating children is a private cost to households, while the availability of skilled labor supply resulting from the households' fertility and education choices is a public good, then competitive equilibria typically deliver a suboptimal mix of size and skills of the population. In particular, households would underinvest in their children education compared to the optimal level. This is the case even if households are aware of the increase in savings returns implied by a higher supply of skilled labor and manage to coordinate to try to exploit this effect. This paper shows that a tax-financed compulsory education is unlikely to implement the optimal steady state, even if the mandatory level of education is the optimal one (the system of equations is overdetermined). Nevertheless, a pensions scheme that makes payments contingent to the household fertility and investment in its children's education can implement the first-best steady state. The pension scheme is balanced period by period by financing pensions through a payroll tax on the increase in children's labor income resulting from their parents' human capital investment.

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  • Julio Davila, 2011. "Optimal population and education," Post-Print halshs-00653997, HAL.
  • Handle: RePEc:hal:journl:halshs-00653997
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00653997
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    References listed on IDEAS

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    More about this item

    Keywords

    population; Education; population.;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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