We study the welfare effects of education subsidies and pensions in an OLG model with physical and human capital.
Pay-as-you-go social security may increase welfare even if the growth rate of the economy is less than the interest rate.
Education subsidies have ambiguous effects in general because they involve income as well as price effects.
We identify non-monotonicities in the welfare effects of modifying the tax parameters that are absent in exogenous growth models.