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Growth and Parental Preference for Education

Chu, Angus C. and Furukawa, Yuichi and Zhu, Dongming (2015): Growth and Parental Preference for Education.

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This study explores the implications of parental preference for education in an innovation-driven growth model that features an interaction between endogenous technological progress and human capital accumulation. Parents invest in children's education partly due to the preference for their children to be educated. We consider a preference parameter that measures the degree of this parental preference for education. We find that a higher degree of parental preference for education increases human capital, which is conducive to innovation, but the increase in education investment also crowds out resources for R&D investment. As a result, a stronger parental preference for education has an inverted-U effect on the steady-state equilibrium growth rate. We also analytically derive the complete transitional path of the equilibrium growth rate and find that an increase in the degree of education preference has an initial negative effect on growth. Furthermore, we explore the robustness of our results in a scale-invariant extension of the model and find that although the steady-state equilibrium growth rate becomes monotonically increasing in the degree of education preference, it continues to have an initial negative effect on the transitional growth rate.

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