Education Choices, Longevity and Optimal Policy in a Ben-Porath Economy

Abstract : We develop a 3-period overlapping generations (OLG) model where individuals borrow at the young age to finance their education. Education does not only increase future wages, but, also, raises the duration of life, which, in turn, affects education choices, in line with Ben Porath (1967). We first identify conditions that guarantee the existence of a stationary equilibrium with perfect foresight. Then, we reexamine the conditions under which the Ben-Porath effect prevails, and emphasize the impact of human capital decay and preferences. We compare the laissez-faire with the social optimum, and show that the latter can be decentralized provided the laissez-faire capital stock corresponds to the one satisfying the modified Golden Rule. Finally, we introduce intracohort heterogeneity in the learning ability, and we show that, under asymmetric information, the second-best optimal non-linear tax scheme involves a downward distortion in the level of education of less able types, which, quite paradoxically, would reinforce the longevity gap in comparison with the laissez-faire.
Document type :
Preprints, Working Papers, ...
Complete list of metadatas

Cited literature [29 references]  Display  Hide  Download

https://halshs.archives-ouvertes.fr/halshs-01230932
Contributor : Caroline Bauer <>
Submitted on : Thursday, November 19, 2015 - 11:46:00 AM
Last modification on : Wednesday, July 17, 2019 - 5:38:02 PM
Long-term archiving on : Friday, April 28, 2017 - 3:09:16 PM

File

wp201540.pdf
Files produced by the author(s)

Identifiers

  • HAL Id : halshs-01230932, version 1

Collections

Citation

Yukihiro Nishimura, Pierre Pestieau, Grégory Ponthière. Education Choices, Longevity and Optimal Policy in a Ben-Porath Economy. 2015. ⟨halshs-01230932⟩

Share

Metrics

Record views

493

Files downloads

1184