Education Choices, Longevity and Optimal Policy in a Ben-Porath Economy

Yukihiro Nishimura, Pierre Pestieau and Gregory Ponthiere
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Yukihiro Nishimura: Osaka University [Osaka]

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Abstract: We develop a 3-period overlapping generations (OLG) model where individuals borrow at the young age to finance their education. Education does not only increase future wages, but, also, raises the duration of life, which, in turn, affects education choices, in line with Ben Porath (1967). We first identify conditions that guarantee the existence of a stationary equilibrium with perfect foresight. Then, we reexamine the conditions under which the Ben-Porath effect prevails, and emphasize the impact of human capital decay and preferences. We compare the laissez-faire with the social optimum, and show that the latter can be decentralized provided the laissez-faire capital stock corresponds to the one satisfying the modified Golden Rule. Finally, we introduce intracohort heterogeneity in the learning ability, and we show that, under asymmetric information, the second-best optimal non-linear tax scheme involves a downward distortion in the level of education of less able types, which, quite paradoxically, would reinforce the longevity gap in comparison with the laissez-faire.

Keywords: Education; Life expectancy; OLG models; Optimal policy (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-age, nep-dge and nep-edu
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01230932v1
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Education choices, longevity and optimal policy in a Ben-Porath economy (2018)
Working Paper: Educaiton choices, longevity and optimal policy in a Ben-Porath economy (2018)
Working Paper: Education choices, longevity and optimal policy in a Ben-Porath economy (2018)
Working Paper: Education choices, longevity and optimal policy in a Ben-Porath economy (2018)
Working Paper: Education Choices, Longevity and Optimal Policy in a Ben-Porath Economy (2015)
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