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

Bei Li, J. Zhang

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

© 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
Volume129
DOIs
Publication statusPublished - 2015

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Education
Leisure
Fertility
Physical capital
Government
Optimality
Human capital
Endogenous fertility
Human capital accumulation
Tax
Debt
Labor
Public finance
Human capital externalities

Cite this

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abstract = "{\circledC} 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.",
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Efficient education subsidization and the pay-as-you-use principle. / Li, Bei; Zhang, J.

In: Journal of Public Economics, Vol. 129, 2015, p. 41-50.

Research output: Contribution to journalArticle

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T1 - Efficient education subsidization and the pay-as-you-use principle

AU - Li, Bei

AU - Zhang, J.

PY - 2015

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N2 - © 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.

AB - © 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.

U2 - 10.1016/j.jpubeco.2015.07.002

DO - 10.1016/j.jpubeco.2015.07.002

M3 - Article

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EP - 50

JO - Journal of Public Economics

JF - Journal of Public Economics

SN - 0047-2727

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