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An Analysis Of Education Subsidy In The Presence Of Fertility Decisions, Human Capital Accumulation, And Spillovers, Woan Foong Wong

Honors Papers

The paper hypothesizes that the level of aggregate human capital in an economy affects the overall returns of an individual's human capital accumulation and fertility decision. However, the positive externalities from aggregate human capital are not internalized by households in their investment decisions. Using an overlapping-generations model, specify the household’s optimization problem in a rural developing country where parents have an old-age support motive that underlies the benefits of having and educating children. The optimal decision of parents is then contrasted with that of the social planner. They differ in that the social planner internalizes the externalities of aggregate human …