Fiscal Policy and Educational Attainment in the United States - a Generational Accounting Perspective

43 Pages Posted: 18 Mar 2004

See all articles by Xavier Chojnicki

Xavier Chojnicki

University of Lille

Frédéric Docquier

Université catholique de Louvain; CREAM, Centre for Research on Environmental Appraisal & Management, UK; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 2004

Abstract

In this paper, we investigate the consequences of the rise in educational attainment on the US generational accounts. We build on the 1995 accounts of Gokhale et al. (1999) and disaggregate them per schooling level. We show that low skill newborns are characterized by a negative generational account (-15.4% of their lifetime labor income) whilst medium and high skill newborns have positive accounts (26.8 and 32.3% of their lifetime labor income). Compared to Gokhale et al., our baseline forecast is more optimistic. Nevertheless, the rise in educational attainment is not strong enough to restore the generational balance. The current fiscal policy generates a long run deficit. Balancing the budget requires increasing taxes (by about 1.2%) or reducing transfers (by about 2.7%). These results are robust to growth and discounting assumptions, to the treatment of education spending. They are sensitive to assumptions about the schooling level of future generations.

Keywords: generational accounting, human capital, fiscal policy

JEL Classification: E62, H6, J24

Suggested Citation

Chojnicki, Xavier and Docquier, Frédéric, Fiscal Policy and Educational Attainment in the United States - a Generational Accounting Perspective (March 2004). IZA Discussion Paper No. 1040. Available at SSRN: https://ssrn.com/abstract=518522

Xavier Chojnicki

University of Lille ( email )

Lille
France

HOME PAGE: http://https://sites.google.com/site/xchojnicki/

Frédéric Docquier (Contact Author)

Université catholique de Louvain ( email )

IRES
Place Montesquieu 3
Louvain-la-Neuve, 1348
Belgium

HOME PAGE: http://https://perso.uclouvain.be/frederic.docquier/

CREAM, Centre for Research on Environmental Appraisal & Management, UK

University of Newcastle
NE1 7RU Newcastle Upon Tyne
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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