Intergenerational transfers: Public education and pensions with endogenous fertility

Article Type

Research Article

Publication Title

Journal of Economic Dynamics and Control

Abstract

We consider an overlapping generations economy, where parents are altruistic towards their children, and children provide old-age support to parents. We show that when the education loan market is imperfect, an education subsidy targeted towards achieving the complete-market level of education distorts fertility decisions. However, augmenting the education policy with pension support in the old-age can restore both education and fertility to complete-market level. This highlights that an Education-Pension package is more potent than perceived by the existing literature – it not only replaces the missing credit market but also corrects for fertility distortions. Our results also hold when state intervention in education is justified due to human-capital externality, instead of credit market frictions.

DOI

https://10.1016/j.jedc.2023.104697

Publication Date

8-1-2023

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