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Asymmetric information and overeducation

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  • Mendolicchio, Concetta

    ()
    (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

  • Paolini, Dimitri
  • Pietra, Tito

Abstract

"We consider an economy where production may use labor of two different skill levels. Workers are heterogeneous and, by investing in education, self-select into one of the two skills. Ex-ante, when firms choose their investments in physical capital, they do not know the level of human capital prevailing in the labor market they will be active in. We prove existence and constrained inefficiency of competitive equilibria, which are always characterized by overeducation. An increase in total expected surplus can be obtained by shrinking, at the margin, the set of workers investing in high skill. This can be implemented by imposing taxes on the cost of investing in high skill or by imposing a progressive labor earning tax." (Author's abstract, IAB-Doku) ((en))

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Bibliographic Info

Paper provided by Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] in its series IAB Discussion Paper with number 201214.

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Length: 24 pages
Date of creation: 14 Jun 2012
Date of revision:
Publication status: published in: The B.E. Journal of Economic Analysis and Policy, Vol. 12, No. 1 (2012), 27 p.
Handle: RePEc:iab:iabdpa:201214

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Keywords: ökonomische Theorie; Humankapital; Bildungsinvestitionen; Gleichgewichtstheorie;

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References

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  1. Bas Jacobs & Lans Bovenberg, 2008. "Optimal Taxation of Human Capital and theEarnings Function," CESifo Working Paper Series 2250, CESifo Group Munich.
  2. C. Mendolicchio & D. Paolini & T. Pietra, 2010. "Income taxes, subsidies to education, and investments in human capital," Working Papers 701, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Schmerer, Hans-Jörg, 2014. "Foreign direct investment and search unemployment: Theory and evidence," International Review of Economics & Finance, Elsevier, Elsevier, vol. 30(C), pages 41-56.
  4. Eaton, Jonathan & Rosen, Harvey S, 1980. "Taxation, Human Capital, and Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 70(4), pages 705-15, September.
  5. Gaertner,Wulf & Schokkaert,Erik, 2011. "Empirical Social Choice," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9781107013940.
  6. repec:dgr:uvatin:2005036 is not listed on IDEAS
  7. Charlot, Olivier & Decreuse, Bruno, 2005. "Self-selection in education with matching frictions," Labour Economics, Elsevier, Elsevier, vol. 12(2), pages 251-267, April.
  8. A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
  9. Fleurbaey,Marc & Maniquet,François, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521887427.
  10. Bas Jacobs, 2005. "Optimal Income Taxation with Endogenous Human Capital," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 295-315, 05.
  11. Daniel Heuermann & Benedikt Halfdanarson & Jens Suedekum, 2010. "Human Capital Externalities and the Urban Wage Premium: Two Literatures and their Interrelations," Urban Studies, Urban Studies Journal Limited, Urban Studies Journal Limited, vol. 47(4), pages 749-767, April.
  12. Anderberg, Dan & Andersson, Fredrik, 2003. "Investments in human capital, wage uncertainty, and public policy," Journal of Public Economics, Elsevier, Elsevier, vol. 87(7-8), pages 1521-1537, August.
  13. Bas Jacobs & Dirk Schindler & Hongyan Yang, 2012. "Optimal Taxation of Risky Human Capital," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 114(3), pages 908-931, 09.
  14. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(3), pages 779-804, August.
  15. Duranton, Gilles & Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2010. "The Economics of Clusters: Lessons from the French Experience," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199592203, October.
  16. Poeschel, Friedrich, 2012. "The time trend in the matching function," IAB Discussion Paper 201203, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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Citations

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Cited by:
  1. DEIDDA, Luca G. & PAOLINI , Dimitri & ,, 2013. "Wage premia, education race, and supply of educated workers," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2013062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Jens Suedekum & Wolfgang Dauth, 2013. "Profiles of local growth and industrial change: Facts and an explanation," ERSA conference papers ersa13p247, European Regional Science Association.
  3. MERTENS, Jean-François & RUBINCHIK, Anna, 2012. "Pareto optimality of the golden rule equilibrium in an overlapping generations model with production and transfers," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2012033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Mendolicchio, Concetta & Pietra, Tito, 2014. "On the efficiency properties of the Roy's model under asymmetric information," IAB Discussion Paper 201408, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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