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The Intergenerational Overlap and Human Capital Formation

Author

Listed:
  • Stark, Oded

    (University of Bonn and University of Vienna)

  • Wang, Yong

    (City University of Hong Kong)

Abstract

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.

Suggested Citation

  • Stark, Oded & Wang, Yong, 2004. "The Intergenerational Overlap and Human Capital Formation," Economics Series 152, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:152
    as

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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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    References listed on IDEAS

    as
    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. 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, February.
    3. 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 505-518, November.
    4. Wang, Yong & Michael C M Leung, 2003. "Endogenous Health Care, Life Expectancy, and Economic Development," Royal Economic Society Annual Conference 2003 218, Royal Economic Society.
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    Cited by:

    1. Carolina Arteaga Cabrales, 2011. "Human Capital Externalities and Growth," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 29(66), pages 12-47, Diciembre.
    2. Foreman-Peck, James, 2011. "The Western European marriage pattern and economic development," Explorations in Economic History, Elsevier, vol. 48(2), pages 292-309, April.

    More about this item

    Keywords

    Parental support; Human capital formation; Social welfare;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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