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Regional income distribution and human capital formation: A model of intergenerational education transfer in a global context

Listed author(s):
  • Bartholomae, Florian W.
  • Popescu, Alina M.

The demographic problems in developed countries are getting more and more important. Very low fertility rates especially among skilled individuals will soon become relevant for a country's economy. Also of importance is education of children. Since there is an increasing demand for skilled workers, the positive correlation between social background and education worsens the situation. Therefore family planning as well as fertility providing and educational measures are of major importance for regional decision makers. We define in our model the optimal number of children considering the income and education of their parents by using a Cobb-Douglas utility function which implies that children and consumption are complementary goods. Children are considered to be a differentiated good with respect to their education. Therefore, we distinguish between high educated and low educated children. After deciding the optimal number of children, the education level of children has to be determined. We assume that only one parent is responsible for the education. Further we presume a negative correlation between the opportunity costs of educating a child and their parent's qualification. Since we consider the parents income and education, many cases result. Regional policy makers have the possibility to change individual decisions regarding offspring by creating monetary incentives. As wages and therefore family income are exogenous, the regional governments have only two policy measures left: either child allowance and/or scholarships. Considering the population's preferences, regions may optimize the number and structure of children.

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Paper provided by Universität der Bundeswehr München, Economic Research Group in its series Working Papers in Economics with number 2009,1.

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Date of creation: 2009
Handle: RePEc:zbw:ubwwpe:20091
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  1. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
  2. Daniel Chen & Michael Kremer, 1999. "Income-Distribution Dynamics with Endogenous Fertility," American Economic Review, American Economic Association, vol. 89(2), pages 155-160, May.
  3. Morand, Olivier F, 1999. "Endogenous Fertility, Income Distribution, and Growth," Journal of Economic Growth, Springer, vol. 4(3), pages 331-349, September.
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