| As the human capital plays an important role in the economic growth, the effect of social security on human capital investment attracts scholars' interests. In this paper, we first view the literature over the past years home and abroad. In these literatures, the scholars analyze the different effect of social security on economics and human capital investment using OLG (overlapping generation) model under PAYG (pay as you go) and FF (fully funded) pension system. However, the model they use should change some assumption for the China's economy and the empirical study using the data of China are rare to see. This paper using the reformation of China urban pension system as the background, study the effect of China's urban pension system on human capital investment.In the altruism point of view, parents would have utility from human capital of their children and so would invest in their children's education. In an OLG model with three periods, child, young and old, people would choose consume and saving in both young and old period to maximum their utility. Considering the reality of China, we use the solutions of next period instead of dynamic equilibrium solutions. The result shows that the effect of pension system on human capital investment is affected by other economics factors and not quite sure.In the empirical analysis, we use the panel data of 30 regions of China in the year 1999-2004. The result shows that for the whole area, social security has the negative effect on the human capital investment. But while the regions are restricted in the east part of China, the results turn out that the more pension people can get in the old period, the more investment on human capital they would invest on their children's generation. This paper analyzes the possible reason for the result and it can be viewed as the discussion on choice of the best social security tax rate.Finally, we connect the theory to the reality and put forward the corresponding policy recommendations. |
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