Who pays for job training ?

Abstract

An optimal education subsidy formula is derived using an overlapping generationsmodel with parental altruism. The model predicts that public education subsidy isgreater in economies with lesser parental altruism because a benevolent governmenthas to compensate for the shortfall in private education spending of less altruisticparents with a finite life. On the other hand, growth is higher in economies withgreater parental altruism. Cross-country regressions using the World Values Surveyfor altruism lend support to our model predictions. The model provides insights aboutthe reasons for higher education subsidy in richer countries.