Optimal education and pensions in an endogenous growth model

Elena Del Rey and Miguel-Angel Lopez-Garcia

Journal of Economic Theory, 2013, vol. 148, issue 4, 1737-1750

Abstract: In OLG economies with life-cycle saving and exogenous growth, competitive equilibria in general fail to achieve optimality because individuals accumulate amounts of physical capital that differ from the one that maximizes welfare along a balanced growth path (the Golden Rule). With human capital, a second potential source of departure from optimality arises, related to education decisions. We propose to recover the Golden Rule of physical and also human capital accumulation. We characterize the optimal policy to decentralize the Golden Rule balanced growth path when there are no constraints for individuals to finance their education investments, and show that it involves education taxes. Also, when the government subsidizes the repayment of education loans, optimal pensions are positive.

Keywords: Endogenous growth; Human capital; Intergenerational transfers; Education policy (search for similar items in EconPapers)
JEL-codes: D90 H21 H52 H55 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (18)

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Working Paper: Optimal education and pensions in an endogenous growth model (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:148:y:2013:i:4:p:1737-1750

DOI: 10.1016/j.jet.2013.01.003

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