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Government Subsidy for Student Loans, Human Capital Accumulation and Economic Development

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  • Noda, Hideo
  • Fang, Fengqi

Abstract

Devising effective economic policies that promote investment in human capital is essential for economic development. Government subsidy for student loans is often discussed as one of the various policy instruments that support human capital accumulation. The purpose of this study is to investigate the relationship between a government's subsidy rate for student loans and economic growth from a theoretical perspective. This study also considers how changes in life expectancy and the labor force population affect economic growth. To address these issues, we construct an overlapping-generations model with uncertain lifetime. Our model suggests that increasing the government's subsidy rate for student loans promotes economic growth. Moreover, there is a positive relationship between improved life expectancy among individuals with sufficient investment in human capital and economic growth. Furthermore, a decline in the labor force population decreases economic growth, even when negative peer effects are predominant in human capital formation.

Suggested Citation

  • Noda, Hideo & Fang, Fengqi, 2025. "Government Subsidy for Student Loans, Human Capital Accumulation and Economic Development," MPRA Paper 125649, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:125649
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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