Éducation in endogenous growth models

This PhD thesis consists of four papers, whose major aim is to analyse the
role of education in an endogenous growth setting. The theoretical framework
uses computable OLG models, where the behaviour of individuals is modelled
within a lifecycle framework.
Firstly, in order to build computable general equilibrium models that are
reliable for policy analysis, it is necessary to reproduce all major stylised
facts that characterise lifecycle profiles, notably: i) the marked decline in
consumption around retirement age; and, ii) in old age, financial wealth data
drawn from surveys run down at a slower pace than that implied by usual
formulations of the lifecycle theory of consumption. In the first paper, it is
argued that a lifecycle framework can reproduce the above-mentioned facts if
one assumes: i) uncertainty in the duration of life in a model with imperfect
annuity markets; and, ii) existence of a “sufficiently” strong bequest motive.
Secondly, it is shown that education choices can play a major role in
dampening the negative impact on economic growth of a decline in fertility. In
the second paper, it is found that the growth assumption (endogenous versus
exogenous) does matter. In an endogenous growth model driven by education, a
negative demographic shock represents an “investment opportunity” in
education. The rise in education, together with the externalities in human
capital formation bring about a permanent increase in labour productivity.
Thirdly, in an OLG model with an externality in the education sector, it is
important to investigate the set of policies that decentralises the social
optimum, depending on some major model assumptions. In the third paper, using
calibrations that assume altruism, the results suggest that optimal policies
involve basically: a) an education subsidy; and, b) a PAYG pension.
Fourthly, given the complementary of education and R&D;, it is important to
investigate if the adoption of optimal policies to correct a number of
externalities causes a leverage effect on growth and welfare. The framework
developed in the fourth paper provides for a numerical evaluation of the
relative importance of two sources of inefficiency, namely: i) a “market-
power” distortion, resulting from the mark-up pricing of intermediate goods;
ii) versus the inefficiency in the allocation of resources caused by various
“externalities”, affecting the education and R&D; sectors.
Overall, the results obtained highlight the importance of treating human
capital as an endogenous variable.