Asymmetric Information And Overeducation
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 skills. This can be implemented by imposing taxes on the cost of investing in high skills or by imposing a progressive labor earning tax.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 12 (2012)
Issue (Month): 1 (October)
|Contact details of provider:|| Web page: http://www.degruyter.com|
|Order Information:||Web: http://www.degruyter.com/view/j/bejeap|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Concetta Mendolicchio & Dimitri Paolini & Tito Pietra, 2014.
"Income Taxes, Subsidies to Education, and Investments in Human Capital,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 16(1), pages 24-47, 02.
- Mendolicchio, Concetta & Paolini, Dimitri & Pietra, Tito, 2011. "Income taxes, subsidies to education, and investments in human capital," IAB Discussion Paper 201107, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
- 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.
- Charlot, Olivier & Decreuse, Bruno, 2005. "Self-selection in education with matching frictions," Labour Economics, Elsevier, vol. 12(2), pages 251-267, April.
- Bas Jacobs & Dirk Schindler & Hongyan Yang, 2009.
"Optimal Taxation of Risky Human Capital,"
CESifo Working Paper Series
2529, CESifo Group Munich.
- Duranton, Gilles & Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2010. "The Economics of Clusters: Lessons from the French Experience," OUP Catalogue, Oxford University Press, number 9780199592203, December.
- Schmerer, Hans-Jörg, 2014.
"Foreign direct investment and search unemployment: Theory and evidence,"
International Review of Economics & Finance,
Elsevier, vol. 30(C), pages 41-56.
- Schmerer, Hans-Jörg, 2012. "Foreign direct investment and search unemployment : Theory and evidence," IAB Discussion Paper 201204, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
- A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
- 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.
- Bovenberg, A Lans & Jacobs, Bas, 2001.
"Redistribution and Education Subsidies are Siamese Twins,"
CEPR Discussion Papers
3099, C.E.P.R. Discussion Papers.
- Lans Bovenberg, A. & Jacobs, Bas, 2005. "Redistribution and education subsidies are Siamese twins," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2005-2035, December.
- Bovenberg, A.L. & Jacobs, B., 2001. "Redistribution and Education Subsidies are Siamese Twins," Discussion Paper 2001-82, Tilburg University, Center for Economic Research.
- Anderberg, Dan & Andersson, Fredrik, 2003. "Investments in human capital, wage uncertainty, and public policy," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1521-1537, August.
- Bas Jacobs & A. Lans Bovenberg, 2011.
"Optimal Taxation of Human Capital and the Earnings Function,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 13(6), pages 957-971, December.
- Bas Jacobs & Lans Bovenberg, 2008. "Optimal Taxation of Human Capital and theEarnings Function," CESifo Working Paper Series 2250, CESifo Group Munich.
- Fleurbaey,Marc & Maniquet,François, 2011.
"A Theory of Fairness and Social Welfare,"
Cambridge University Press, number 9780521887427, November.
- A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
- Jonathan Eaton & Harvey S. Rosen, 1979.
"Taxation, Human Capital and Uncertainty,"
497, Princeton University, Department of Economics, Industrial Relations Section..
- Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 779-804.
- Daniel Heuermann & Benedikt Halfdanarson & Jens Suedekum, 2010.
"Human Capital Externalities and the Urban Wage Premium: Two Literatures and their Interrelations,"
Urban Studies Journal Limited, vol. 47(4), pages 749-767, April.
- Halfdanarson, Benedikt & Heuermann, Daniel F. & Suedekum, Jens, 2008. "Human Capital Externalities and the Urban Wage Premium: Two Literatures and their Interrelations," IZA Discussion Papers 3493, Institute for the Study of Labor (IZA).
- 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].
When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:12:y:2012:i:1:n:47. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.