Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099735 | Journal of Economic Dynamics and Control | 2006 | 28 Pages |
Abstract
In this article we provide a model of growth with endogenous fertility in which multiple steady states derive from the modelling of household liquidity constraints. We put forward an innovative approach to the finance of higher education by assuming that youths can borrow because their parents guarantee the loan repayment with their income. Young individuals can renege on their debt and lenders provide them credit only up to an amount which is commensurate to a collateral provided to children by their families. Parents care about children's education and choose a collateral which depends positively on family income and negatively on family size. A stable trap of low-development is characterized by high-fertility rates and low investment in human capital. On the other hand, in economies with a sufficiently low starting rate of fertility borrowing constraints gradually vanish and the process of growth reaches a steady state characterized by the optimality of fertility and schooling choices. Government subsidies to education may reduce population growth and promote human capital investment if fertility at steady states is lower than thresholds.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Erasmo Papagni,