Economic growth and the harmful effects of student loan debt on biomedical research

Abstract

Modern theories of economic growth emphasise the key role of human capital and technological progress in determining a society's standard of living. In some advanced countries, however, higher education costs and the level of indebtedness among graduates have increased dramatically during recent years. This phenomenon is particularly evident in the United States, and within the biomedical sciences sector. In this paper, we develop a basic model of economic growth in order to investigate the effects of biomedical graduate indebtedness on the allocation of human resources in R&D activities and hence on the growth process. In particular, we derive a 'science-growth curve', i.e., a relation between the share of pure researchers and the economy's rate of growth, and we find two possible effects of student indebtedness on economic growth: a composition effect and a productivity effect.