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Education Policies to Stimulate Growth

By Mun S. Ho and Dale W. Jorgenson

Abstract

We examine how inv estment in human capital affects the U.S. economy using a three-sector growth model. Investment in human capital is produced in a constant returns to scale Education sector that has capital, labor, student time and intermediates as inputs. The perfectly foresighted household determines investment in physical capital while the government determines the rate of Education investment. The expenditures on the education sector are financed by taxes. The household’s time is spent on work, study or leisure. The model includes demographic detail from a model that projects the U.S. population. We find that higher enrollment (together with higher expenditures and taxes) will raise welfare. On the other hand higher expenditures on unchanged enrollments will reduce welfare

Year: 1999
OAI identifier: oai:CiteSeerX.psu:10.1.1.194.8962
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