The intergenerational overlap and human capital formation

Oded Stark*, Yong Wang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

A new microeconomic explanation for the divergent experiences of economies in forming human capital is proposed. It is suggested 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. It is argued 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. The strong correlation between the formation of human capital and life expectancy is thus attributed 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. Conditions are provided under which a longer overlap results in a higher level of per capita output.

Original languageEnglish
Pages (from-to)45-58
Number of pages14
JournalReview of International Economics
Volume13
Issue number1
DOIs
StatePublished - Feb 2005
Externally publishedYes

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