Why to Invest in your Neighbor? Social Contract on Educational Investment
It may be in the interest of low-ability individuals to subsidize the education of high-ability individuals. Sufficient conditions are surprisingly mild: positive externalities in education and complementarity in production between human capital and labor supllied by the low-ability individuals. However, tax competition and the free mobility of the educated give rise to time-inconsistency and free-riding problems which render such a social contract infeasible and result in a subotimally low investment in education.
|Date of creation:||1999|
|Date of revision:|
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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.:
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Munich Reprints in Economics
19303, University of Munich, Department of Economics.
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- Hamilton, Jonathan H, 1987. "Optimal Wage and Income Taxation with Wage Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 373-88, June.
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