TY  - GEN
AB  - In this paper we analyze an endogenous growth model with human capital that
results from public educational spending. We allow for public debt and analyze
three different debt policies: a balanced government budget, a slight deficit policy
where debt grows but less than GDP, and a strong deficit policy where debt grows at
the same rate as GDP. We find that the balanced budget policy and the policy with
a slightly growing public debt are equivalent as concerns long-run economic growth.
Further, those two rules yield higher growth than a debt policy where public debt
grows at the same rate as GDP, unless the government is a creditor. As concerns
welfare, it can be demonstrated that a strong deficit policy yields lower welfare
than a balanced budget and a slight deficit, unless initial debt ratios are low and
the intertemporal elasticity of substituion is high. Finally, it is demonstrated that
there may exist an inverted U-shaped relation between welfare and deficit financed
educational spending.
DA  - 2015
DO  - 10.4119/unibi/2915563
KW  - Public Debt
KW  - Human Capital Formation
KW  - Economic Growth
KW  - Welfare
LA  - eng
PY  - 2015
SN  - 2196-2723
SP  - 25-
TI  - Human capital formation and public debt: Growth and welfare effects of three different deficit policies
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29155638
Y2  - 2024-11-22T08:00:28
ER  -