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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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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- Sinn, Hans-Werner, 1997.
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19854, University of Munich, Department of Economics.
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- Rehme, G., 1999. "Public Policies and Education, Economic Growth and Income Distribution," Economics Working Papers eco99/14, European University Institute.
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