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Optimal policy and the risk properties of human capital reconsidered

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  • Anderberg, Dan

Abstract

This paper considers how optimal education and tax policy depends on the risk properties of human capital. 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. The robustness of these results is explored in two generalizations: nonobservability of education and nonobservability of consumption. Finally, policies that implement the constrained efficient allocations are considered.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 9-10 (October)
Pages: 1017-1026

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:9-10:p:1017-1026

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: Education Optimal taxation Risk;

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