ECON 151 Lecture Notes - Lecture 6: Utility, Capital Accumulation, Public Good
11 Nov 2020
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Document Summary
Monopolies : sometimes encouraged by the state, sometimes natural (harvard, Huge information problem : hard to measure good education, hard to observe (even to. Many externalities : between generation, between peers; Partial public good : education is partially non-rival and partially non-excludable central role of the regulator. 2 periods (childhood and adulthood), childhood starts at birth and finishes at parent"s death; Everyone has the same return to education r; Degree of altruism a is given and constant across parents (exogenous). a is >0. Parents draw utility from either their own consumption or the future utility of their children. Up (cp , wc ) = l(cp ) + av (wc) sc. wp = cp + yc. Where u, l and v are utility functions, Wp is the parent"s wage, cp the parent"s consumption, yc the consumption/investment spend on kids, wc child"s wage and a the degree of altruism. Parents decide between own and child consumption.
