Generational Conflict, Human Capital Accumulation, and Economic Growth

Center for Policy Research Working Paper No. 28

34 Pages Posted: 13 Apr 2011

See all articles by Douglas Holtz-Eakin

Douglas Holtz-Eakin

Independent

Mary E. Lovely

Syracuse University - Department of Economics

Mehmet Serkan Tosun

University of Nevada, Reno - Department of Economics; IZA Institute of Labor Economics

Date Written: June 1, 2000

Abstract

Worldwide, dependency ratios are forecast to increase dramatically in the next 50 years. A great deal of attention has been devoted to understanding the changes in fiscal policies that "must" take place to accommodate these changes. In contrast, less effort has been concentrated on studying the fiscal shifts that will endogenously result from demographic pressures. An example of particular interest is the degree to which a more elderly population will support public spending for education. We use an overlapping-generations model to investigate the effect of this demographic transition on the endogenous determination of public spending for education. A demographic transition alters the identity of the median voter, leading to a preference for less education spending. If the public sector is inefficiently small, demographic transition exacerbates the underprovision of human capital. Alternatively, such a shift may trim an inefficiently large government, reduce tax rates and raise capital per worker enough to raise education spending. Thus, there is no automatic link between demographic transition and reduced support for those programs whose benefits are concentrated among the young.

JEL Classification: I22, J14, O57

Suggested Citation

Holtz-Eakin, Douglas and Lovely, Mary E. and Tosun, Mehmet Serkan, Generational Conflict, Human Capital Accumulation, and Economic Growth (June 1, 2000). Center for Policy Research Working Paper No. 28, Available at SSRN: https://ssrn.com/abstract=1808190 or http://dx.doi.org/10.2139/ssrn.1808190

Douglas Holtz-Eakin

Independent ( email )

Mary E. Lovely (Contact Author)

Syracuse University - Department of Economics ( email )

Syracuse, NY 13244-1020
United States

Mehmet Serkan Tosun

University of Nevada, Reno - Department of Economics ( email )

1664 N. Virginia Street
Reno, NV 89557
United States
775-784-6678 (Phone)

HOME PAGE: http://www.coba.unr.edu/econ/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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