Efficient Education Policy - A Second-Order Elasticity Rule
Assuming a two-period model with endogenous choices of labor, education, and saving, efficient education policy is characterized for a Ramsey-like scenario in which the government is constrained to use linear instruments. It is shown that education should be effectively subsidized if, and only if, the elasticity of the earnings function is increasing in education. The strength of second-best subsidization increases in the elasticity of the elasticity of the earnings function. This second-order elasticity rule extends the well-known Ramsey-Boiteux inverse elasticity rule.
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- 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.
- Bas Jacobs & Lans Bovenberg, 2008.
"Optimal Taxation of Human Capital and theEarnings Function,"
CESifo Working Paper Series
2250, CESifo Group Munich.
- 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.
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