Efficient education subsidization and the pay-as-you-use principle

Bei Li, J. Zhang

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)


© 2015 Elsevier B.V.. We investigate whether the pay-as-you-use principle of public finance should apply to education subsidization for children to internalize human capital externalities in an intergenerational model with endogenous fertility, leisure, and accumulations of human and physical capital. We characterize social optimality concerning physical and human capital accumulation, leisure, labor, and fertility to guide the design of efficient education subsidization. We show that efficient education subsidization requires future generations benefitting from it pay for it when fertility and leisure are endogenous. Namely, the government should uphold the pay-as-you-use principle to subsidize children's education by deficit and repay the debt by future taxes.
Original languageEnglish
Pages (from-to)41-50
JournalJournal of Public Economics
Publication statusPublished - 2015


Dive into the research topics of 'Efficient education subsidization and the pay-as-you-use principle'. Together they form a unique fingerprint.

Cite this