Enhancing growth and welfare through debt-financed education

Stauvermann, Peter J. and Kumar, Ronald Ravinesh ORCID: 0000-0001-9658-4896 (2017) Enhancing growth and welfare through debt-financed education. Economic Research - Ekonomska Istraživanja, 30 (1). pp. 207-222. ISSN 1331-677X

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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.

Item Type: Article
Additional Information: This is an electronic version of the paper published in Economic Research - Ekonomska Istraživanja, 2017 © 2017 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/)
Divisions: Institute of Management > Bolton Business School
Depositing User: Tracey Gill
Date Deposited: 18 Apr 2017 09:31
Last Modified: 02 Nov 2018 11:47
Identification Number: 10.1080/1331677X.2017.1305799
URI: http://ubir.bolton.ac.uk/id/eprint/1128

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