Optimal Demand for Human Capital: An Overlapping Generations Model

An OLG model is developed which examines parental investment in human capital in a model incorporating human capital externalities. In developing countries, in the absence of well-developed capital markets, children are considered as forms of economic assets. Children's human capital is determined by parental decicionsm, which in turn is influenced by the associated child labour-schooling conflict. The paper analyses the individual optimal human capital investment and compares it with the social optimum.