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OPTIMAL INVESTMENT, EDUCATION, AND CONSUMPTION UNDER DEMOGRAPHIC CHANGES FOR A SMALL-OPEN ECONOMY

HOAN XUAN PHAM

Insurance Commission, Ministry of Finance, Vietnam, 24 Tran Hung Dao, Hanoi, Vietnam

https://doi.org/10.1142/S021759080900315XCited by:1 (Source: Crossref)

Abstract

It is shown, using a vintage model of education which is developed in this paper, that given the assumptions of the model, the optimal path of investment in education is to keep the level of investment per student constant and the optimal path of investment in physical capital is to keep the capital-labor ratio constant over time. The pressure to reduce current consumption caused by population ageing is partly mitigated by the fact that a younger population, in the current time, is relatively more efficient in producing utility than an older one, in the future.

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