Why to Invest in your Neighbor? Social Contract on Educational Investment
AbstractIt may be in the interest of low-ability individuals to subsidize the education of high-ability individuals. Sufficient conditions are surprisingly mild: positive externalities in education and complementarity in production between human capital and labor supllied by the low-ability individuals. However, tax competition and the free mobility of the educated give rise to time-inconsistency and free-riding problems which render such a social contract infeasible and result in a subotimally low investment in education.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 202.
Date of creation: 1999
Date of revision:
Externalities in education; complementarity; social contract; tax competition;
Other versions of this item:
- Poutvaara, P. & Kanniainen, V., 1999. "Why to Invest in your Neighbor? Social Contract on Educational Investment," University of Helsinki, Department of Economics 462, Department of Economics.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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