Optimal Policy and the Risk Properties of Human Capital Reconsidered

No 2451, CESifo Working Paper Series from CESifo

Abstract: This paper considers how optimal education and tax policy depends on the risk properties of human capital. It is demonstrated that a key feature of human capital investments is whether they increase or decrease wage risk. In a benchmark model it is shown that this feature alone determines whether a constrained optimal allocation should be characterized by a positive or a negative education premium. In the same model a positive intertemporal wedge is optimal. A set of generalizations, including non-observability of education, non-observability of consumption, and temporal resolution of uncertainty, are then considered to examine the robustness of these results.

Keywords: education; optimal taxation; risk (search for similar items in EconPapers)
JEL-codes: D81 H21 I21 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Optimal policy and the risk properties of human capital reconsidered (2009)
Working Paper: Optimal Policy and the Risk-Properties of Human Capital Reconsidered (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2451

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