Efficient Investment in Children

S. Rao Aiyagari, Jeremy Greenwood () and Ananth Seshadri ()

No 481, RCER Working Papers from University of Rochester - Center for Economic Research (RCER)

Abstract: Many would say that children are society's most precious resource. So, how should we invest in them? To gain insight into this question, a dynamic general equilibrium model is developed where children differ by ability. Parents invest time and money in their offspring, depending on their altruism. This allows their children to grow up as more productive adults. First, the efficient allocation is characterized. Next, this is compared with the outcome that arises when financial markets are incomplete. The situation where child-care markets are also lacking is then examined. Additionally, the consequences of impure altruism are analyzed.

Keywords: Investment in children; efficiency; imperfect financial markets; impure altruism; lack of child-care markets. (search for similar items in EconPapers)
JEL-codes: D1 D31 D58 I2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
Date: 2001-05
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Forthcoming, Journal of Economic Theory

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Related works:
Journal Article: Efficient Investment in Children (2002)
Working Paper: Efficient investment in children (2001)
Working Paper: Efficient investment in children (1999)
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Persistent link: http://EconPapers.repec.org/RePEc:roc:rocher:481

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