Altruistic Overlapping Generations of Households and the Contribution of Human Capital to Economic Growth

Accolley, Delali (2015): Altruistic Overlapping Generations of Households and the Contribution of Human Capital to Economic Growth.

Abstract

We developed a dynamic deterministic general equilibrium model that accounts for human capital accumulation through both home education and schooling. The model is characterized by an altruistic link between households of succeeding generations in the sense parents, caring about their children's welfare, impart them freely some knowledge at home in addition to helping them financially when they are schooling. The education regime is private and features distinguishing our model from related works are: (1) young households are economically active and work part-time while schooling, (2) allocating time to schooling or labor entails disutility, and (3) tuition fee is proportional to the time allocated to schooling. We calibrated the model to some balanced growth facts observed between 1981 and 2019 in the Province of Quebec.

We have used our model to investigate the contribution of human capital to economic growth. To do that, we have simulated the model assuming in turn a permanent rise in the tuition and in the household's ability to learn. Each of these two shocks reveals a positive correlation between output, education, and human capital, provided the latter variable is stationary. We have also used the predictions of the model to shed a light on the student crisis Quebec witnessed in 2012 following the decision of the government to increase tuition. We have concluded that raising tuition will neither harm education nor negatively impact on students' ability to pay.

ABSTRACT IN FRENCH- Nous avons développé un modèle d’équilibre général dynamique et déterministe qui explique l’accumulation du capital humain par l’enseignement à domicile et la scolarisation. Le modèle est caractérisé par un lien altruiste entre des ménages de générations successives dans le mesure où, soucieux du bien-être de leurs enfants, les parents leur transmettent sans contrainte des connaissances à domicile en plus de les aider financièrement pendant qu’ils étudient. Le système d’éducation est privé et les caractéristiques qui distinguent notre modèle des autres sont : (1) les jeunes sont économiquement actifs et travaillent pendant qu’ils étudient, (2) le fait de consacrer du temps aux études ou au travail occasionne des désutilités et (3) les droits de scolarité sont proportionnels au temps alloué aux études.

Nous avons utilisé notre modèle pour étudier la contribution du capital humain à la croissance économique. Pour cela, nous avons simulé le modèle en supposant à tour de rôle une hausse permanente des droits de scolarité par crédit et de la capacité d’apprentissage des ménages. Chacun de ces deux chocs révèle une corrélation positive entre la production, l’éducation et le capital humain, à condition que celui-ci soit une variable stationnaire. Par la suite, nous avons utilisé les prédictions de notre modèle pour faire la lumière sur la crise étudiante que le Québec a connue en 2012, à la suite de la décision du gouvernement d’augmenter les frais de scolarité. Nous concluons que le fait d’augmenter les frais de scolarité ne nuit ni à l’éducation ni à la capacité des étudiants de payer leurs droits de scolarité.

• Item Type: MPRA Paper
• Language: English
• Keywords: Education, economic growth, human capital, overlapping generations
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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