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Student loans, fertility, and economic growth

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  • Miyazaki, Koichi

Abstract

The cost of attaining higher education is growing in some developed countries. More young people borrow larger amounts than before to finance their higher education. Several media reports indicate that student loans might affect young people's decision making regarding important life events such as marriage, childbirth, purchasing a house, and so on. Specifically, this paper focuses on how the burden of student loans affects young people's decision making with regard to the number of children to have, and studies the fertility rate, gross domestic product (GDP) growth rate, and growth rate of GDP per capita using a three-period overlapping generations model. A young agent needs to borrow to accumulate his/her human capital, although for some reason, s/he faces the borrowing constraint. In the next period, the agent repays his/her debt as well as determines the number of children to have. Under this setting, this paper analyzes how the tightness of the borrowing constraints affects the growth rates of the population, GDP, and GDP per capita. The paper finds that when rearing children is time-consuming, the population growth rate decreases as the borrowing constraints are relaxed. Moreover, the paper shows a case in which the GDP growth rate decreases as the borrowing constraints are relaxed, whereas the growth rate of GDP per capita still increases. In addition, I show that if the cost of rearing children is mainly monetary, then the population growth rate is not necessarily decreasing as the borrowing constraints are relaxed. The paper also calibrates the model using U.S. data.

Suggested Citation

  • Miyazaki, Koichi, 2016. "Student loans, fertility, and economic growth," MPRA Paper 71604, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:71604
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    File URL: https://mpra.ub.uni-muenchen.de/71604/1/MPRA_paper_71604.pdf
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    References listed on IDEAS

    as
    1. David Andolfatto & Martin Gervais, 2006. "Human Capital Investment and Debt Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 52-67, January.
    2. De Gregorio, Jose, 1996. "Borrowing constraints, human capital accumulation, and growth," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 49-71, February.
    3. David Croix & Philippe Michel, 2007. "Education and growth with endogenous debt constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(3), pages 509-530, December.
    4. Kitaura, Koji, 2012. "Education, borrowing constraints and growth," Economics Letters, Elsevier, vol. 116(3), pages 575-578.
    5. Koichi Miyazaki, 2013. "Pay-as-you-go social security and endogenous fertility in a neoclassical growth model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1233-1250, July.
    6. Fanti, Luciano & Gori, Luca, 2012. "A note on endogenous fertility, child allowances and poverty traps," Economics Letters, Elsevier, vol. 117(3), pages 722-726.
    7. David de la Croix & Matthias Doepke, 2003. "Inequality and Growth: Why Differential Fertility Matters," American Economic Review, American Economic Association, vol. 93(4), pages 1091-1113, September.
    8. Tullio Jappelli & Marco Pagano, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 83-109.
    9. 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.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Student loans, fertility, and economic growth
      by Christian Zimmermann in NEP-DGE blog on 2016-06-24 23:52:52

    More about this item

    Keywords

    Student loans; human capital accumulation; fertility; growth rate of GDP; growth rate of GDP per capita; overlapping generations model;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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