Endogenous growth and welfare effects of education subsidies and intergenerational transfers

We consider an overlapping generations model with endogenous growth and embrace the Two-Part Golden Rule criterion to analyze the welfare effects of intergenerational transfers and education subsidies. The results are compared with those obtained within the well-known exogenous growth framework. In both cases, pay-as-you-go social security enhances welfare if the growth rate is larger than the interest rate at the laissez-faire. However, with endogenous growth, pay-as-you-go social security may also increase welfare even if the growth rate of the economy is less than the interest rate. Education subsidies have an ambiguous impact because they simultaneously transfer resources across generations and change the relative price of investing in human capital. Overall, the paper shows the existence of important non-monotonicities associated with the welfare effects of modifying the tax parameters in an endogenous growth frameworkWe also acknowledge financial support from Instituto de Estudios Fiscales (Spanish Ministry of Finances, 2014-15), the Spanish Ministry of Science (projects ECO2013-45395-R and ECO2012-37572) and the Generalitat de Catalunya (contracts 2014SGR1360 and 2014SGR327, and the XREPP