Public Education and Capital Accumulation
I study an overlapping generations model where physical and human capitals are used in production and can be accumulated by withholding resources from current consumption. Human capital is accumulated through a schooling system which can be finance either by private expenditures or by taxes on current income or by a combination of both. IN a political equilibrium with majority voting, the median voter may approve of public school financing as an instrument to solve a "free rider problem". It improves the skills of next period's workers which in turn increases the expected return on capital, something which could not be achieved by means of private school financing. Public schools, moreover, turns out to be an instrument for intergenerational income distribution so that they may be preferred to private schools for this motive as well. The model is shown to display a poverty trap (poor societies vote to invest too little in education) as well as persistent growth. I am able to fully characterize the global dynamics of the model, which delivers a number of interesting and potentially testable hypotheses on the relation between income growth , capital accumulation and the development of public education I also endogenize the dynamic behavior of school attendance rates, as well as the choice between public and private financing of schools in the presence of parental altruism. A particular attention is paid to the different performances of a publicly provided school system vis-a-vis a publicly financed school system. It is shown that, under very general conditions, the latter tends to create a better environment for the accumulation of human capital as it fosters support for public education trough the voting mechanism. All through the paper I concentrate on specific functional forms that allow for a closed form solution of the equilibrium dynamics, but all the important results can be shown to apply for a general class of utility and produciton functions.
|Date of creation:||Nov 1992|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.kellogg.northwestern.edu/research/math/
More information through EDIRC
|Order Information:|| Email: |
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.:
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Leininger, Wolfgang, 1986. "The Existence of Perfect Equilibria in a Model of Growth with Altruism between Generations," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 349-67, July.
- Harris, Christopher J, 1985. "Existence and Characterization of Perfect Equilibrium in Games of Perfect Information," Econometrica, Econometric Society, vol. 53(3), pages 613-28, May.
- Psacharopoulos, George, 1989. "Time trends of the returns to education: Cross-national evidence," Economics of Education Review, Elsevier, vol. 8(3), pages 225-231, June.
- Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January.
- V.V. Chari & Patrick J. Kehoe, 1989.
122, Federal Reserve Bank of Minneapolis.
- Michele Boldrin & Ana Montes, 2005.
"The Intergenerational State Education and Pensions,"
Review of Economic Studies,
Oxford University Press, vol. 72(3), pages 651-664.
- Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
- Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers.
- Bernheim, B Douglas & Ray, Debraj, 1986. "On the Existence of Markov-Consistent Plans under Production Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 877-82, October.
- George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
- V. V. Chari & Patrick E. Kehoe, 1990.
"Sustainable Plans and Mutual Default,"
IMF Working Papers
90/22, International Monetary Fund.
- Michele Boldrin, 1991. "Threshold Externalities and Economic Development: A Note," Discussion Papers 953, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
- Michele Boldrin & Larry E. Jones, 2002. "Mortality, Fertility, and Saving in a Malthusian Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 775-814, October.
- Saint-Paul, G. & Verdier, T., 1991.
"Education, Democracy and growth,"
DELTA Working Papers
91-27, DELTA (Ecole normale supérieure).
- Larry E. Jones & Rodolfo E. Manuelli, 1990.
"Finite Lifetimes and Growth,"
NBER Working Papers
3469, National Bureau of Economic Research, Inc.
- Raquel Fernandez & Richard Rogerson, 1992.
"Income Distribution, Communities and the Quality of Public Education: A Policy Analysis,"
NBER Working Papers
4158, National Bureau of Economic Research, Inc.
- Fernandez, R. & Rogerson, R., 1992. "Income Distribution, Communities and the Quality of Public Education: A Policy Analysis," Papers 1, Boston University - Department of Economics.
- Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December.
- Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-59, October.
- Krusell, Per & Rios-Rull, Jose-Victor, 1996.
"Vested Interests in a Positive Theory of Stagnation and Growth,"
Review of Economic Studies,
Wiley Blackwell, vol. 63(2), pages 301-29, April.
- Krusell, P. & Rios-Rull, J.V., 1993. "Vested Interests in a Positive Theory of Stagnation and Growth," Papers 547, Stockholm - International Economic Studies.
- Boldrin, Michele, 1992. "Dynamic externalities, multiple equilibria, and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 198-218, December.
- Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January.
- West, Edwin G., 1991. "Public schools and excess burdens," Economics of Education Review, Elsevier, vol. 10(2), pages 159-169, June.
- Chamley, Christophe, 1993.
"Externalities and Dynamics in Models of "Learning or Doing.","
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 583-609, August.
- Christophe Chamley, 1991. "Externalities and Dynamics in Models of "Learning or Doing"," Boston University - Institute for Economic Development 17, Boston University, Institute for Economic Development.
- Eckstein, Z. & Zilcha, I., 1991.
"The Effects of Compulsury Schooling on Growth Income Distribution and Welfare,"
38-91, Tel Aviv.
- Eckstein, Zvi & Zilcha, Itzhak, 1994. "The effects of compulsory schooling on growth, income distribution and welfare," Journal of Public Economics, Elsevier, vol. 54(3), pages 339-359, July.
- Zvi Eckstein & Itzhak Zilcha, 1991. "The Effects of Compulsory Schooling on Growth, Income Distribution and Welfare," Boston University - Institute for Economic Development 20, Boston University, Institute for Economic Development.
- Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
- Aubhik Khan & Michele Boldrin & Larry E. Jones, 2005.
"Three Equations Generating an Industrial Revolution,"
2005 Meeting Papers
124, Society for Economic Dynamics.
- Michele Boldrin & Larry E. Jones & Aubhik Khan, 2005. "Three Equations Generating an Industrial Revolution?," Levine's Bibliography 784828000000000385, UCLA Department of Economics.
- Perotti, Roberto, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 755-76, October.
- Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
- Peltzman, Sam, 1973. "The Effect of Government Subsidies-in-Kind on Private Expenditures: The Case of Higher Education," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 1-27, Jan.-Feb..
- Levin, Henry M., 1991. "The economics of educational choice," Economics of Education Review, Elsevier, vol. 10(2), pages 137-158, June.
When requesting a correction, please mention this item's handle: RePEc:nwu:cmsems:1017. 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: (Fran Walker)
If references are entirely missing, you can add them using this form.