Driving human capital accumulation. The role of grandparents

The role of grandparents in the education process of grandchildren is becoming increasingly important, especially in economies experiencing positive human capital growth rates over time. To investigate the main forces driving such a phenomenon and the effect on human capital accumulation and growth, in the present work we propose an overlapping generations model where the time spent by grandparents on grandchildren’s education is endogenously determined to maximize the expected utility associated with the trade-off between leisure time and grandchildren’s education. By combining analytical tools and numerical simulations, our model shows that the more time grandparents spend educating their grandchildren - quantity - and the more educated they are - quality -, the more education is transmitted from older to younger generations, who will have higher levels of human capital, which will generate higher economic growth. Such a mechanism repeats over time, generating virtuous paths that work as drivers of human capital and physical capital growth. • The time grandparents invest in their grandchildren’s education influences fertility decisions. • The decision to provide childcare is influenced by the rate of human capital growth. • A balanced growth path exists where human capital and physical capital grow at the same rate.