Comparison of Educational Subsidy Schemes in an Endogenous Growth Model

Koichi Miyazaki

FinanzArchiv: Public Finance Analysis, 2023, vol. 79, issue 1, 32-63

Abstract: This study considers a three-period overlapping generations model with an endogenous growth setting in which an agent borrows a loan in the first period and repays it in the second period in a perfect credit market. Two educational subsidy schemes are considered: one is provided when an agent borrows (policy y), and the other is provided when the agent repays their loan (policy m). Thus, policy y is an inter-generational educational subsidy, and policy m is an intra-generational educational subsidy. This study characterizes an equilibrium balanced growth path under each policy and compares two policies from the point of growth and social welfare along an equilibrium balanced growth path. The first finding of this study is that under policy y, the growth rate along an equilibrium balanced growth path always forms an inverted U-shape with respect to the tax rate; under policy m, the growth rate does not always form an inverted U-shape, and under a certain condition, educational subsidy lowers the growth rate along an equilibrium balanced growth path. The second finding is that under policy y, as long as social discount factor is sufficiently high, an introduction of educational subsidy improves the social welfare, whereas under policy m, in some cases, social welfare is worse off by an introduction of educational subsidy, even if the social discount factor is sufficiently high. The third finding is that policy y is likely to lead an economy to higher growth and higher social welfare than policy m, as analyzed via numerical simulation.

Keywords: inter-generationaleducationalsubsidy; intra-generationaleducationalsubsidy; perfectcreditmarket; balancedgrowthpath; growthrate; socialwelfare (search for similar items in EconPapers)
JEL-codes: H52 I22 O40 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mohrsiebeck.com/en/article/comparison- ... l-101628fa-2023-0002
Fulltext access is included for subscribers to the printed version.

Related works:
Working Paper: On the comparison of educational subsidy schemes in an endogenous growth model (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mhr:finarc:urn:doi:10.1628/fa-2023-0002

Ordering information: This journal article can be ordered from
Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany

DOI: 10.1628/fa-2023-0002

Access Statistics for this article

FinanzArchiv: Public Finance Analysis is currently edited by Alfons Weichenrieder, Ronnie Schöb and Jean-François Tremblay

More articles in FinanzArchiv: Public Finance Analysis from Mohr Siebeck, Tübingen
Bibliographic data for series maintained by Thomas Wolpert ().