Inducing Human Capital Formation: How Efficient Is an Education Subsidy?
This paper presents a two-step job ladder model where a skilled individual faces uncertainty in getting a skilled job and an inferior (unskilled) job down the job ladder is the alternative employment opportunity. When the probability of getting the skilled job is low enough, the model suggests the optimal policy to reach the social optimum is taxing rather than subsidizing human capital investment. The paper analyses the conditions when migration can act as a substitute for subsidizing human capital formation by moving the private optimum closer to the social optimum.
Volume (Year): 9 (2010)
Issue (Month): 2 (August)
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- Caucutt, Elizabeth M. & Kumar, Krishna B., 2003.
"Higher education subsidies and heterogeneity: a dynamic analysis,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 27(8), pages 1459-1502, June.
- Elizabeth M. Caucutt & Krishna B. Kumar, 2000. "Higher Education Subsidies and Heterogeneity, A Dynamic Analysis," RCER Working Papers 472, University of Rochester - Center for Economic Research (RCER).
- Stark, Oded & Wang, Yong, 2002. "Inducing human capital formation: migration as a substitute for subsidies," Journal of Public Economics, Elsevier, vol. 86(1), pages 29-46, October.
- Stark, Oded & Wang, Yong, 2001. "Inducing Human Capital Formation: Migration as a Substitute for Subsidies," Economics Series 100, Institute for Advanced Studies.
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