Regional Income Distribution and Human Capital Formation - A Model of Intergenerational Education Transfer in a Global Context

28 Pages Posted: 12 Mar 2008 Last revised: 24 Feb 2009

See all articles by Florian W. Bartholomae

Florian W. Bartholomae

Munich Business School; University of the German Federal Armed Forces - Universität der Bundeswehr München

Alina M. Popescu

University of the German Federal Armed Forces - Universität der Bundeswehr München

Date Written: February 2009

Abstract

The demographic problems in developed countries are getting more and more important. Very low fertility rates especially among skilled individuals will soon become relevant for a country's economy. Also of importance is education of children. Since there is an increasing demand for skilled workers, the positive correlation between social background and education worsens the situation. Therefore family planning as well as fertility providing and educational measures are of major importance for regional decision makers.

We define in our model the optimal number of children considering the income and education of their parents by using a Cobb-Douglas utility function which implies that children and consumption are complementary goods. Children are considered to be a differentiated good with respect to their education. Therefore, we distinguish between high educated and low educated children. After deciding the optimal number of children, the education level of children has to be determined. We assume that only one parent is responsible for the education. Further we presume a negative correlation between the opportunity costs of educating a child and their parent's qualification. Since we consider the parents income and education, many cases result.

Regional policy makers have the possibility to change individual decisions regarding offspring by creating monetary incentives. As wages and therefore family income are exogenous, the regional governments have only two policy measures left: either child allowance and/or scholarships. Considering the population's preferences, regions may optimize the number and structure of children.

Keywords: population policy, education, qualification, factor proportions, globalization

JEL Classification: D31, D33, J12, J31, R23

Suggested Citation

Bartholomae, Florian W. and Popescu, Alina M., Regional Income Distribution and Human Capital Formation - A Model of Intergenerational Education Transfer in a Global Context (February 2009). Available at SSRN: https://ssrn.com/abstract=1103678 or http://dx.doi.org/10.2139/ssrn.1103678

Florian W. Bartholomae (Contact Author)

Munich Business School ( email )

Elsenheimerstraße 61
Munich, Bavaria 80687
Germany

University of the German Federal Armed Forces - Universität der Bundeswehr München ( email )

Werner-Heisenberg-Weg 39
Neubiberg
Munich, 85579
Germany

Alina M. Popescu

University of the German Federal Armed Forces - Universität der Bundeswehr München ( email )

Werner-Heisenberg-Weg 39
Neubiberg
Munich, 85579
Germany

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