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The Intergenerational Overlap and Human Capital Formation

  • Stark, Oded

    (University of Bonn and University of Vienna)

  • Wang, Yong

    (City University of Hong Kong)

We propose a new microeconomic explanation for the divergent experiences of economies in forming human capital. We suggest that the positive effect of a longer life expectancy on human capital formation arises from two separate effects: a life-expectancy effect and a prolonged intergenerational overlap effect. We argue that the duration of the overlap between generations and the associated parental support can affect the marginal cost of human capital formation and hence its level: parental support is cheaper than market financing. We thus attribute the strong correlation between the formation of human capital and life expectancy not merely to a higher marginal benefit arising from a longer payback period but also to a lower marginal cost arising from a prolonged intergenerational overlap. We provide conditions under which a longer overlap results in a higher level of per-capita output.

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File URL: http://www.ihs.ac.at/publications/eco/es-152.pdf
File Function: First version, 2004
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Paper provided by Institute for Advanced Studies in its series Economics Series with number 152.

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Length: 17 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:ihs:ihsesp:152
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References listed on IDEAS
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  1. Kalemli-Ozcan, Sebnem & Ryder, Harl E. & Weil, David N., 2000. "Mortality decline, human capital investment, and economic growth," Journal of Development Economics, Elsevier, vol. 62(1), pages 1-23, June.
  2. Falk, Ita & Stark, Oded, 2001. "Dynasties and Destiny: On the Roles of Altruism and Impatience in the Evolution of Consumption and Bequests," Economica, London School of Economics and Political Science, vol. 68(272), pages 505-18, November.
  3. repec:cup:cbooks:9780521663731 is not listed on IDEAS
  4. Michael C.M. Leung & Yong Wang, 2010. "Endogenous Health Care, Life Expectancy And Economic Growth," Pacific Economic Review, Wiley Blackwell, vol. 15(1), pages 11-31, 02.
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