Essays in macroeconomics

This dissertation examines two issues: the first, examined in Chapters 1 and 2, is the effect of education policy on welfare, inequality and economic development; the second, presented in Chapter 3, uses a model of health capital accumulation to study cross-country differences in life expectancy.; In Chapter 1, I develop a model of human capital accumulation in which individuals decide how much to invest in their children's education and how long to send their child to school and the government subsidizes their investment. Moral hazard precludes parents from borrowing against their child's future income and there are no insurance markets to protect against bad productivity shocks. Time in school and investments in education are complementary inputs in the production of human capital. The opportunity cost of sending a child to school is foregone earnings from work. I find that revenue-neutral reallocations of public funding from higher to elementary education increase efficiency but reduce equity.; In Chapter 2, I extend the analysis to include a bequest motive for parents. The presence of wealth transfers has a substantial effect on the results: reallocations from higher to elementary education lead to large increases in output and decreases in inequality. The latter occurs because public education investments have a more standard redistributive role within this setting. I use the model to account for cross-country trends in the allocation of public funding to education. The model is able to replicate some of the observed patterns in the data, notably the change in allocation with development.; Chapter 3 uses a simple version of a health capital model developed by Michael Grossman to study differences in life expectancy across countries. The idea is to study whether and how well these observed differences can be replicated using a deterministic model in which individuals choose the length of their life by investing time and goods in their health. This simple model is unable to simultaneously account for the observed wide disparities in output and life expectancy. However, I contend that a somewhat more complicated version of the model would do a better job matching the data.