In presence of imperfections in education loan market, the standard policy response of intervening solely on education front, funded through taxes and transfers, necessarily hurts the initial working population. The literature suggests compensating them via pay-as-you-go pensions as a possible...

This paper studies optimal education policies under endogenous borrowing constraints in a standard life-cycle model. In a closed economy, a policy that appropriately bundles an education subsidy with an old-age pension can restore the complete market allocation. Such a policy also removes...