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Child Allowances, Educational Subsidies and Economic Growth

  • Chen, Hung-Ju

This paper examines the effects on economic growth attributable to government policies of child allowances and educational subsidies. We show that multiple steady states may arise under these two policies, with club convergence occurring, and the initial condition being of relevance, if the tax rate is fairly high. Under a policy of child allowances, an increase in the tax rate is found to raise the quantity of children, but lower the quality of adults; however, under a policy of educational subsidies, with an increase in the tax rate, corresponding increases are found in both the quantity of children and the quality of adults. We also find that considering the ‘threshold’ effects of technological externalities, an economy can escape the poverty trap if the threshold is sufficiently low. For developed countries, introducing child allowances may improve or hurt the welfare while introducing educational subsidies is welfare improving.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 51279.

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Date of creation: 07 Nov 2013
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Handle: RePEc:pra:mprapa:51279
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