Enhancing Growth and Welfare through debt-financed Education

Stauvermann, Peter Josef and Kumar, Ronald (2014): Enhancing Growth and Welfare through debt-financed Education.

Abstract

Using an over-lapping generations (OLG) model, we show how small open economies can enhance their growth through educational subsidies financed via public debt and reduce their fertility rate. We show that subsidizing education through public debt leads to a Pareto improvement of all generations. Even if a country is a net borrower in the international capital market, we show that this subsidy-policy can help, under certain conditions, to improve its net borrowing position. Especially, our analysis can be applied to less-developed countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: fertility; human capital; education subsidy; government debt.
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

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