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Linking consumption externalities with optimal accumulation of human and physical capital and intergenerational transfers

  • Monisankar Bishnu

    ()

    (Indian Statistical Institute, New Delhi
    Institute of Economic Growth)

This paper opens a new perspective from which one can explain the presence of government intervention in education even in the absence of human capital externality. It argues that consumption externalities can provide rationale for government intervention in education. Within the context of overlapping generations economy, it has also been shown that competitive equilibrium either underaccumulates both physical and human capital or overaccumulates both. Thus the result rules out the possibility of competitive equilibrium deviating from the social optimum in its allocation of physical and human capital in opposite directions. Immediate policy issues have also been discussed.

(This abstract was borrowed from another version of this item.)

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File URL: http://www.isid.ac.in/~pu/dispapers/dp11-01.pdf
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Paper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 11-01.

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Length: 32 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:ind:isipdp:11-01
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  20. Kodde, David A. & Ritzen, Josef M.M., 1985. "The demand for education under capital market imperfections," European Economic Review, Elsevier, vol. 28(3), pages 347-362, August.
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  25. Zhang, Jie, 2003. "Optimal debt, endogenous fertility, and human capital externalities in a model with altruistic bequests," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1825-1835, August.
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