On government-created credit markets for education and endogenous growth

Elena Del Rey and Miguel-Angel Lopez-Garcia

Economic Modelling, 2020, vol. 92, issue C, 170-179

Abstract: Interest in public loans to fund (higher) education has been increasing in the last decades. This paper explores the general welfare properties of government-created credit markets for education in a three-period overlapping generations model with physical and human capital. It shows that the mere existence of public credit markets is second-best in nature, and cannot decentralize the optimum. Achieving the first-best “Golden Rule” balanced growth path requires a government loan system that lends the amounts required for optimal investments in education and an optimally chosen pure pay-as-you-go social security system. Student loans and pensions thus appear as two inseparable elements of the policy that maximizes social welfare.

Keywords: Endogenous growth; Human capital; Intergenerational transfers; Public policy; Credit markets for education (search for similar items in EconPapers)
JEL-codes: D90 H21 H52 H55 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:92:y:2020:i:c:p:170-179

DOI: 10.1016/j.econmod.2019.12.016

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