The Design of Optimal Education Policies
This paper studies the education policy chosen by a utilitarian government. In the model, households differ in their income and in their children's ability; income is observed by the government, but ability is private information. Households can use private education, but cannot borrow to finance it. The government can finance education with income tax, but at the cost of blunting the individuals' incentive to exert labour market effort. The optimal education policy we derive is elitist: it increases the spread between the educational achievement of the bright and the less bright individuals, compared to private provision. It is also such that the education received by less bright individuals depends positively on their parental income. Finally, the optimal education policy is input regressive, in the sense of Arrow (1971, Quarterly Journal of Economics, 38, 175–208): households with higher income and brighter children contribute less in tuition fees towards the cost of the education system than households with lower income and less bright children. Copyright 2002, Wiley-Blackwell.
Volume (Year): 69 (2002)
Issue (Month): 2 ()
|Contact details of provider:|| |
When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:69:y:2002:i:2:p:437-466. 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: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.