On welfare criteria and optimality in an endogenous growth model

Elena Del Rey and Miguel-Angel Lopez-Garcia

No 2010024, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In this paper we explore the consequences for optimality of a social planner adopting two different welfare criteria. The framework of analysis is an OLG model with physical and human capital. We first show that, when the SWF is a discounted sum of individual utilities defined over consumption per unit of natural labour, the precise cardinalization of the individual utility function becomes crucial for the characterization of the social optimum. Also, decentralizing the social optimum requires an education subsidy. In contrast, when the SWF is a discounted sum of individual utilities defined over consumption per unit of efficient labour, the precise cardinalization of preferences becomes irrelevant. More strikingly, along the optimal growth path, education should be taxed.

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: 2010-05-01
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-hrm
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On Welfare Criteria and Optimality in an Endogenous Growth Model (2012)
Working Paper: On welfare criteria and optimality in an endogenous growth model (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2010024

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