Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/72294 
Year of Publication: 
2004
Series/Report no.: 
Reihe Ökonomie / Economics Series No. 152
Publisher: 
Institute for Advanced Studies (IHS), Vienna
Abstract: 
We propose a new microeconomic explanation for the divergent experiences of economies in forming human capital. We suggest that the positive effect of a longer life expectancy on human capital formation arises from two separate effects: a life-expectancy effect and a prolonged intergenerational overlap effect. We argue that the duration of the overlap between generations and the associated parental support can affect the marginal cost of human capital formation and hence its level: parental support is cheaper than market financing. We thus attribute the strong correlation between the formation of human capital and life expectancy not merely to a higher marginal benefit arising from a longer payback period but also to a lower marginal cost arising from a prolonged intergenerational overlap. We provide conditions under which a longer overlap results in a higher level of per-capita output.
Subjects: 
duration of intergenerational overlap
parental support
human capital formation
social welfare
JEL: 
D91
J24
Document Type: 
Working Paper

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