Fiscal Policy and Educational Attainment in the United States – A Generational Accounting Perspective
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.
|Date of creation:||Mar 2004|
|Date of revision:|
|Publication status:||published in: Economica, 2007, 47 (294), 329-350|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- M. Dolores Collado & Iñigo Iturbe Ormaetxe & Guadalupe Valera, 2002.
"Quantifying The Impact Of Immigration On The Spanish Welfare State,"
Working Papers. Serie AD
2002-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- 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, 05.
- 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.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp1040. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.