TITLE

Optimal education policies under endogenous borrowing constraints

AUTHOR(S)
Wang, Min
PUB. DATE
January 2014
SOURCE
Economic Theory;Jan2014, Vol. 55 Issue 1, p135
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This paper studies optimal education policies under endogenous borrowing constraints in a standard life-cycle model. In a closed economy, a policy that appropriately bundles an education subsidy with an old-age pension can restore the complete market allocation. Such a policy also removes persistent indeterminacies and endogenous fluctuations that exist in its absence. In a small open economy, a similar policy may restore the complete market allocation for a wide range of parameters, a range much wider than previously believed. These results broaden the rationale for a two-armed welfare state (education and pension) to a large class of economies.
ACCESSION #
93449361

 

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