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Generational Conflict, Human Capital Accumulation, and Economic Growth

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Abstract

Worldwide, dependency ratios are forecast to increase dramatically in the next 50 years. A great deal of attention has been devoted to understanding the changes in fiscal policies that "must" take place to accommodate these changes. In contrast, less effort has been concentrated on studying the fiscal shifts that will endogenously result from deographic pressures. An example of particular interest is the degree to which a more elderly population will support public spending for education. We use an overlapping-generations model to investigate the effect of this demographic transition on the endogenous determination of public spending for education. A demographic transition alters the identity of the median voter, leading to a preference for less education spending. If the public sector is inefficiently small, demographic transition exacerbates the underprovision of human capital. Alternatively, such a shift may trim an inefficiently large government, reduce tax rates, and raise capital per worker enough to raise education spending. Thus, there is no automatic link between demographic transition and reduced support for those programs whose benefits are concentrated among the young.

Suggested Citation

  • Douglas Holtz-Eakin & Mary E. Lovely & Mehmet Serkan Tosun, 2000. "Generational Conflict, Human Capital Accumulation, and Economic Growth," Center for Policy Research Working Papers 28, Center for Policy Research, Maxwell School, Syracuse University.
  • Handle: RePEc:max:cprwps:28
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    14. repec:fth:harver:1490 is not listed on IDEAS
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    Cited by:

    1. Panu Poutvaara, 2006. "On the political economy of social security and public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 345-365, June.
    2. Mehmet Serkan Tosun, 2000. "Worldwide Population Aging: Endogenous Policy Formation and Capital Market Transmissions in the Presence of Symmetric Demographic Shocks," Center for Policy Research Working Papers 27, Center for Policy Research, Maxwell School, Syracuse University.
    3. Radhika Lahiri & Elisabetta Magnani, 2008. "On inequality and the allocation of public spending," Economics Bulletin, AccessEcon, vol. 5(9), pages 1-8.

    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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