Generational Conflict, Human Capital Accumulation, and Economic Growth

Douglas Holtz-Eakin, Mary Lovely and Mehmet Tosun

No 28, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: Worldwide, dependency ratios are forecast to increase dramatically in the next 50 years. A great deal of attention has been devoted to understanding the changes in fiscal policies that "must" take place to accommodate these changes. In contrast, less effort has been concentrated on studying the fiscal shifts that will endogenously result from deographic pressures. An example of particular interest is the degree to which a more elderly population will support public spending for education. We use an overlapping-generations model to investigate the effect of this demographic transition on the endogenous determination of public spending for education. A demographic transition alters the identity of the median voter, leading to a preference for less education spending. If the public sector is inefficiently small, demographic transition exacerbates the underprovision of human capital. Alternatively, such a shift may trim an inefficiently large government, reduce tax rates, and raise capital per worker enough to raise education spending. Thus, there is no automatic link between demographic transition and reduced support for those programs whose benefits are concentrated among the young.

JEL-codes: I22 J14 O57 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2000-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Generational Conflict, Human Capital Accumulation, and Economic Growth (2000)
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