Government Subsidy for Student Loans, Human Capital Accumulation and Economic Development

Hideo Noda and Fengqi Fang

MPRA Paper from University Library of Munich, Germany

Abstract: Devising effective economic policies that promote investment in human capital is essential for economic development. Government subsidy for student loans is often discussed as one of the various policy instruments that support human capital accumulation. The purpose of this study is to investigate the relationship between a government's subsidy rate for student loans and economic growth from a theoretical perspective. This study also considers how changes in life expectancy and the labor force population affect economic growth. To address these issues, we construct an overlapping-generations model with uncertain lifetime. Our model suggests that increasing the government's subsidy rate for student loans promotes economic growth. Moreover, there is a positive relationship between improved life expectancy among individuals with sufficient investment in human capital and economic growth. Furthermore, a decline in the labor force population decreases economic growth, even when negative peer effects are predominant in human capital formation.

Keywords: Economic development; Human Capital; Life expectancy; Peer effects; Student loans (search for similar items in EconPapers)
JEL-codes: H2 I25 O40 (search for similar items in EconPapers)
Date: 2025-08-07
New Economics Papers: this item is included in nep-gro and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:125649

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