Welfare Effects of Privatizing Public Education When Human Capital Investments Are Risky
AbstractIn an overlapping-generations model with risky human capital investment, borrowing constraints, and intergenerational transmission of abilities, I examine the effects of a change from publicly to privately funded college education. I find that from this reform, college graduates are better off compared to other workers since the college wage premium increases by around 50 percent. The reform deteriorates aggregate efficiency by (i) enforcing liquidity constraints, (ii) abolishing public insurance provision against educational risk, and (iii) increasing utility costs of college education via intergenerational spillovers. A success-dependent student loan system can offset efficiency losses but fails to generate efficiency gains.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Human Capital.
Volume (Year): 6 (2012)
Issue (Month): 2 ()
Pages: 87 - 123
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JHC/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Dirk Krueger & Alexander Ludwig, 2013.
"Optimal Progressive Taxation and Education Subsidies in a Model of Endogenous Human Capital Formation,"
PIER Working Paper Archive
13-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Krueger, Dirk & Ludwig, Alexander, 2013. "Optimal Progressive Taxation and Education Subsidies in a Model of Endogenous Human Capital Formation," MEA discussion paper series 13267, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
- Alexander Ludwig & Dirk Krueger, 2010. "Optimal Progressive Taxation and Education Subsidies in a Model of Endogenous Human Capital Formation," 2010 Meeting Papers 388, Society for Economic Dynamics.
- Dirk Krueger & Alexander Ludwig, 2013. "Optimal Progressive Taxation and Education Subsidies in a Model of Endogenous Human Capital Formation," Working Paper Series in Economics 60, University of Cologne, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.