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Fiscal Policy and Educational Attainment in the United States – A Generational Accounting Perspective

Author

Listed:
  • Chojnicki, Xavier

    (University of Lille)

  • Docquier, Frédéric

    (LISER)

Abstract

In this paper, we investigate the consequences of the rise in educational attainment on the US generational accounts. We build on the 1995 accounts of Gokhale et al. (1999) and disaggregate them per schooling level. We show that low skill newborns are characterized by a negative generational account (-15.4% of their lifetime labor income) whilst medium and high skill newborns have positive accounts (26.8 and 32.3% of their lifetime labor income). Compared to Gokhale et al., our baseline forecast is more optimistic. Nevertheless, the rise in educational attainment is not strong enough to restore the generational balance. The current fiscal policy generates a long run deficit. Balancing the budget requires increasing taxes (by about 1.2%) or reducing transfers (by about 2.7%). These results are robust to growth and discounting assumptions, to the treatment of education spending. They are sensitive to assumptions about the schooling level of future generations.

Suggested Citation

  • Chojnicki, Xavier & Docquier, Frédéric, 2004. "Fiscal Policy and Educational Attainment in the United States – A Generational Accounting Perspective," IZA Discussion Papers 1040, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1040
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    References listed on IDEAS

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    1. M. Dolores Collado & IÒigo Iturbe-Ormaetxe & Guadalupe Valera, 2004. "Quantifying the Impact of Immigration on the Spanish Welfare State," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(3), pages 335-353, May.
    2. Robert Haveman, 1994. "Should Generational Accounts Replace Public Budgets and Deficits?," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 95-111, Winter.
    3. Philip Oreopoulos & Alan J. Auerbach, 1999. "Analyzing the Fiscal Impact of U.S. Immigration," American Economic Review, American Economic Association, vol. 89(2), pages 176-180, May.
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    Cited by:

    1. Guillaume Allègre & Thomas Melonio & Xavier Timbeau, 2012. "Dépenses publiques d'éducation et inégalités. Une perspective de cycle de vie," Revue économique, Presses de Sciences-Po, vol. 63(6), pages 1055-1079.
    2. Hippolyte d’ALBIS & Dalal MOOSA, 2015. "Generational Economics and the National Transfer Accounts," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 81(4), pages 409-441, December.
    3. Marchiori, Luca, 2011. "Demographic trends and international capital flows in an integrated world," Economic Modelling, Elsevier, vol. 28(5), pages 2100-2120, September.
    4. Antoine Bommier & Ronald Lee & Tim Miller & Stéphane Zuber, 2010. "Who Wins and Who Loses? Public Transfer Accounts for US Generations Born 1850 to 2090," Population and Development Review, The Population Council, Inc., vol. 36(1), pages 1-26, March.
    5. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h84a0it2m is not listed on IDEAS
    6. repec:hal:wpspec:info:hdl:2441/5l6uh8ogmqildh09h84a0it2m is not listed on IDEAS
    7. repec:hal:spmain:info:hdl:2441/53r60a8s3kup1vc9jipk5i5h7 is not listed on IDEAS
    8. repec:hal:spmain:info:hdl:2441/5l6uh8ogmqildh09h84a0it2m is not listed on IDEAS
    9. Miyazato, Naomi, 2015. "Intergenerational redistribution policies of the 1990s and 2000s in Japan: An analysis using generational accounting," Japan and the World Economy, Elsevier, vol. 34, pages 1-16.

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    More about this item

    Keywords

    fiscal policy; generational accounting; human capital;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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