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Fiscal Policy and Educational Attainment in the United States - A Generational Accounting Perspective

  • Xavier Chojnicki

    (Medee University of Lille 1)

  • Frederic Docquier

    (Cadre University of Lille 2 & IZA-Bonn)

In this paper, we investigate the consequences of the rise in educational attainment on the US generational accounts. We build on the 1995 accounts of Gokhale and al. (1999) and disaggregate them per schooling level. We show that low skill newborns are characterized by a negative generational account (-15.4% of their lifetime labor income) whilst medium and high skill newborns have positive accounts (26.8% and 32.3% of their lifetime labor income). Compared to Gokhale et al., our baseline forecast is more optimistic. Nevertheless, the rise in educational attainment is not strong enough to restore the generational balance. The current fiscal policy generates a long-run deficit. Balancing the budget requires increasing taxes (by about 1.2%) or reducing transfers (by about 2.7%). These results are rather robust to growth and discounting assumptions as well as to the treatment of education spending. They are sensitive to assumptions about the schooling level of future generations.

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File URL: http://econwpa.repec.org/eps/pe/papers/0303/0303002.pdf
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Paper provided by EconWPA in its series Public Economics with number 0303002.

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Length: 25 pages
Date of creation: 10 Mar 2003
Date of revision: 18 Mar 2004
Handle: RePEc:wpa:wuwppe:0303002
Note: Type of Document - Acrobat PDF; prepared on PC; to print on A4; pages: 25 ; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Robert Haveman, 1994. "Should Generational Accounts Replace Public Budgets and Deficits?," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 95-111, Winter.
  2. M. Dolores Collado & IÒigo Iturbe-Ormaetxe & Guadalupe Valera, 2004. "Quantifying the Impact of Immigration on the Spanish Welfare State," International Tax and Public Finance, Springer, vol. 11(3), pages 335-353, 05.
  3. Philip Oreopoulos & Alan J. Auerbach, 1999. "Analyzing the Fiscal Impact of U.S. Immigration," American Economic Review, American Economic Association, vol. 89(2), pages 176-180, May.
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