THE EFFECTS OF COMPULSORY SCHOOLING ON GROWTH, INCOME-DISTRIBUTION AND WELFARE

In this paper we consider an OLG model with productive capital and hum an capital affecting the quality of labor. In each generation parents invest in their children's education but disregard its external effect on the aggregate production function. Government intervention in prov iding compulsory schooling increases economic growth (along the equili brium path), while the intragenerational income distribution becomes m ore equal. Also, in the long run, the majority of individuals in each generation are better off due to compulsory schooling.