HUMAN-CAPITAL AND INCOME TAXATION IN AN ENDOGENOUS GROWTH-MODEL

This paper examines the role of public expenditures on human capital f ormation using the Becker and Barro (1988) overlapping generations mod el with endogenous fertility. Here human capital is publicly produced and financed by income tax. In our numerical examples, if the governme nt values the welfare of future generations as much as the dynastic he ad does, the optimal income tax rate for the financing of education is on the order of six to ten percent.