Original scientific paper
https://doi.org/10.1080/1331677X.2017.1305799
Enhancing growth and welfare through debt-financed education
Peter J. Stauvermann
Ronald R. Kumar
Abstract
Using an overlapping generations (OLG) model, we show how
relatively small open economies can enhance their growth through
educational subsidies financed via public debt and reduce their
fertility rate. We show that subsidising education through public debt
leads to an A-Pareto improvement of all generations. Even if a country
is a net borrower in the international capital market, we show that this
subsidy policy can help, under certain conditions, to improve its net
borrowing position. This has strong implications for the calculation
of the 3% deficit to Gross Domestic Product ratio set by the European
Union because the analysis implies that public expenditures for
education should be subtracted from the government deficit before
applying the deficit criterion.
Keywords
Economic growth; fertility; human capital; education subsidy; public debt
Hrčak ID:
180812
URI
Publication date:
1.12.2017.
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