Comparison of Educational Subsidy Schemes in an Endogenous Growth Model

This study considers a three-period overlapping generations model with an endogenous growth setting, in which agent borrows the first period and repays loan second under perfect credit market. Two educational subsidy schemes are considered: one is provided when other their loan. compares rates social welfare each scheme at unique balanced path equilibrium. The contribution of this paper that it provides sufficient conditions rate higher than other. A key to determining size relationship whether production goods services physical-capital-intensive, determines interest rate. shows may not be achieved simultaneously. Specifically, presents case wherein, even if student loans subsidized cost education subsidized, defined by Golden Rule criterion former can lower latter scheme.