Fiscal sustainability under physical and human capital accumulation in an overlapping generations model

Takumi Motoyama ()
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Takumi Motoyama: Graduate School of Economics, Osaka University

No 17-05, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: We consider fiscal sustainability by using an overlapping generations model with human capital accumulation (private and public education) and public debt. Based on this model, we explicitly show (i) the parameter region in which the economy cannot be fiscally sustainable for any initial endowment, and (ii) the threshold of initial endowment over (under) which the economy diverges (converges) to the steady state. Importantly, the threshold is neutral to the level of initial human capital. Further, we show the existence and uniqueness of the growth-maximizing level of each policy variable (i.e., the tax rate and public education/production ratio).

Keywords: Human capital accumulation; Public education; Public debt; Fiscal sustainability (search for similar items in EconPapers)
JEL-codes: E62 H52 H63 I28 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2017-03
New Economics Papers: this item is included in nep-dge, nep-edu, nep-fdg, nep-mac and nep-pbe
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