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Self-Financing Education, Borrowing Constraints, Government Policies, and Economic Growth
1 : Universitat de Barcelona
(UB)
-
Website
University of Barcelona Gran Via de les Corts Catalanes, 585 08007 Barcelona -
Spain
We analyze how public policies for self-...nancing education–public fund for loans and deferred
deductibility of education expenses–a¤ect growth in an overlapping generations economy where
individuals can be borrowing-constrained on human capital investment. We show that public
loans positively a¤ect growth in the unconstrained economy, while how tax deductibility a¤ects
growth depends on the magnitude of both public loans and tax deductibility. In the borrowingconstrained economy, public loans positively a¤ect growth, while tax deductibility does not a¤ect
growth. Both government policies a¤ect the borrowing-constraint tightness and, therefore, can
shift the economy from being borrowing-constrained to unconstrained or vice versa.
