Educational and Wage Risk: Social Insurance vs. Quality of Education
AbstractIn this model of education, where individuals are exposed both to educational risk and to wage risk within the skilled sector, successful graduation depends both on individual effort to study and on public resources. We show that insuring the present risks is a dichotomic task: Wage risk is diversified ex post among the skilled by graduate taxation and skill-specific tuition fees. Educational risk of failure and inequality between skilled and unskilled workers are mitigated ex ante by enhancing the quality of education. The necessary expenditures are optimally financed by regressive tuition fees and the net revenue from the graduate tax.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2513.
Date of creation: 2008
Date of revision:
human capital investment; educational risk; wage risk; learning effort; graduate taxation; regressive tuition fees;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- I20 - Health, Education, and Welfare - - Education - - - General
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
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