Optimal Accumulation in an Endogenous Growth Setting with Human Capital
24 Pages Posted: 25 Apr 2006
Date Written: April 2006
This paper considers a three-overlapping-generations model of endogenous growth wherein human capital is the engine of growth. It first contrasts the laissez-faire and the optimal solutions. Three possible accumulation regimes are distinguished. Then it discusses a standard set of tax-transfer instruments that allow for decentralization of the social optimum. Within the limits of our model, the rationale for the standard pattern of intergenerational transfers (the working-aged financing the education of the young and the pension of the old) is seriously questioned. On pure efficiency grounds, the case for generous public pensions is rather weak.
Keywords: endogenous growth, human capital, intergenerational transfers
JEL Classification: D90, H21, H52
Suggested Citation: Suggested Citation