ENDOGENOUS GROWTH, HUMAN-CAPITAL, AND BEQUESTS IN A LIFE-CYCLE MODEL

This paper investigates the relationship between growth and efficiency in an overlapping generations economy in which altruistic parents endow their children with human capital (education) and leave physical bequests. We give conditions under which the physical bequest motive is not operative in a balanced equilibrium when human capital exhibits externalities. We also show that the efficient rate of growth is lower than the competitive one if the economy is bequest-constrained and externalities from education are not very strong. Finally, some fiscal policy experiments are performed for both bequest-constrained economies and unconstrained ones.