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Enhancing growth and welfare through debt-financed education

Stauvermann, P.J. and Kumar, Ronald R. (2017) Enhancing growth and welfare through debt-financed education. Economic Research-Ekonomska Istraživanja . pp. 1-17. ISSN 1331-677X

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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: Journal Article
Additional Information: Paper is available online. Please see the link provided. The journal is indexed by SSCI.
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
H Social Sciences > HJ Public Finance
Divisions: Faculty of Business and Economics (FBE) > School of Accounting and Finance
Depositing User: Ronald Kumar
Date Deposited: 13 Apr 2017 00:17
Last Modified: 13 Apr 2017 00:17

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