• Selected
• Entire List

Abstract:
The paper studies the determinants of income distribution and growth in an overlapping generations economy with heterogeneous households. Our framework has the following main features: (1) heterogeneity of consumers with respect to wealth and parental human capital; (2) intergenerational transfers are accomplished via investment in the education of the younger generation. Heterogeneity in income results from the distribution of human capital across individuals in a nondegenerate way. The human capital production is affected by the "home-education", provided by the parents, as well as the "public-education" which is provided equally to all young individuals of the same generation. Due to investments in human capital our economy is an endogenous growth model. First, we explore the effects of technological improvements in the human capital process, upon the distribution of income at each date along the equilibrium path. Second, we study the impact of such technological progress on growth and relate these results to the income distribution inequality. Third, we provide numerical simulations to quantify the effect of changes in the parameters of the model. Simulation results include exact Gini coefficients and tax rate on labor determined endogenously through majority voting.

Human Capital, Income Distribution, Endogenous Growth

Abstract:
The paper studies the effects of cross-country differences in the production process of human capital on income distribution and growth. Our overlapping generations economy has the following features: (1)consumers are heterogenous with respect to parental education and wealth; (2)intergenerational transfers take place via parental education and, public investments in education financed by taxes(possibly,with a level determined by majority voting); (3)due to investment in human capital, which is a factor of production, we have endogenous growth. We explore several types of cross-country variations in the production of human capital, some attributed to 'home-education' and others related to 'public-education', and their effect upon intragenerational income inequality and growth along the equilibrium path. We also indicate how the level of public education affects human capital formation and the conditions leading to poverty traps.

Human Capital,Income Inequality, Endogenous Growth

Abstract:
We consider an OLG economy with endogenous investment in human capital. Heterogeneity in individual human capital levels is generated by random innate ability. The production of human capital depends on each individual's investment in education. This investment decision is taken only after observing a signal which is correlated to his/her true ability, and which is used for updating beliefs. Thus, a better information system affects the distribution of human capital in each generation. Assuming separable and identical preferences for all individuals, we derive the following results in equilibrium: (a) If the relative measure of risk aversion is less (more) than 1 then more information raises (reduces) income inequality. (b) When a risk sharing market is available better information results in higher inequality regardless of the measure of risk aversion.

Information System, Income Inequality, Risk Sharing Markets

Abstract:
The paper considers a two-country model of overlapping generations economies with intergenerational transfers carried out in the form of bequest and investment in human capital. We examine in competitive equilibrium the optimal provision of education with and without capital markets integration. First, we explore how regimes of education provision - public, private or mixed - arise and how they affect the dynamics of autarkic economies. Second, we study the transitory and long-run effects of capital markets integration, in equilibrium, on the optimal provision of education and growth. Third, we examine a competition game where countries compete in the provision of public education.

Altruism, education, growth, human capital, capital markets integration

Abstract:
This paper uses an overlapping generations framework to analyze the implications of different financing regimes in the education sector for human capital formation and economic welfare. Agents privately invest in education after they have received a noisy information signal about their abilities. The incentives of the individuals to invest in education are determined by the financing regime under which the economy operates. The paper analyzes and compares three financing regimes. Under each regime, the payback obligation of an educational loan is contingent, to some extent, on an individual's future income.

higher education, funding regimes, human capital, welfare

Abstract:
Demographic trends in most developed economies are characterized by rising longevity and decreasing birthrates. These trends endanger the sustainability of the current public pension systems. Therefore social security reform proposals are on the agenda in many countries. This paper demonstrates that the analysis of fiscal sustainability of social security must include an additional dimension of public policy, namely education funding. Indeed, the productivity growth of future workers, which depends on human capital accumulation, may outweigh the impact of the demographic problem. This fact is true under both pay-as-you-go (PAYG) and fully funded (FF) social security system. We consider an OLG economy where government, in addition to running social security, also funds education of future workers by means of taxes collected from the current ones. The education tax rates are chosen, in each period, by a majoritarian rule among the relevant constituents. We demonstrate that while the FF system results in relatively higher rates of physical capital accumulation, then under some conditions, other things equal, the PAYG social security regime leads to the choice of relatively higher respective levels of education tax rates in all generations, and thereby to higher rates of human capital accumulation.

social security, funding, growth, human capital

Abstract:
We consider competitive firms operating under price uncertainty when taxation is asymmetric (i.e. profits are taxed at a higher rate than losses are compensated). In the absence of risk sharing tools, the larger 'gap' in taxation may either lower or increase the firm's optimal output, depending on whether the relative measure of risk aversion is less than or larger than 1. In the presence of risk sharing markets optimal output does not depend on the tax rates, nor on the price distribution or the firm's attitude towards risk. The firm will engage in hedging and, as a result, will lower its expected taxes.

Abstract:
The paper offers a unified way to examine several puzzles on inequality dynamics. It focuses on differences in the education technology and their effects on income distributions. Our overlapping generations economy has the following features: (1) consumers are heterogenous with respect to ability and parental human capital; and (2) intergenerational transfers take place via parental direct investment in education and, public education financed by taxes (possibly, with a level determined by majority voting). We explore several variations in the production of human capital, some attributed to ‘home-education’ and others related to ‘public-education’, and indicate how various changes in education technologies affect the intragenerational income inequality along the equilibrium path.