Parental Health, Education Investment and Human Capital Accumulation

Abstract

We extend the simple overlapping generations model with human capital formation to incorporate parental health condition determined by the health investment made by children. We model this health investment from children to parents as an upstream transfer motivated by exchanging for a higher level of human capital. We first show that the government should provide subsidies for individuals’ education and health investments. Second, the subsidy rates should be higher if the effectiveness of education investment or intergenerational transmission on human capital accumulation is higher