Education, Distributive Justice, and Adverse Selection
We consider a model of education planning in an economy in which agents differ in their costs of acquiring education. The agents' cost parameter, called "talent," is not observed. The Principal is endowed with a fixed sum of money, with which two types of transfer can be made: in cash and in kind. The Principal can finance transfers in kind, called "help," by means of schooling expenditures, which reduce the agent's education cost. The Principal seeks to maximize a social welfare function which is a CES index of utility levels. We study the optimal allocation of individual education effort, schooling expenditures (help), and cash, under self-selection and budget constraints. Assuming first that the set of types is finite, and that help and effort are sufficiently substitutable, we find that individual education investment levels are an increasing function, and help is a decreasing function of talent. Utility levels cannot be equalized because of self-selection constraints. More aversion for inequality unequivocally leads to more inequality of educational achievements, and to more assistance through redistribution. This remains true in the limit, under strictly egalitarian preferences of the Principal. The same qualitative properties hold in the general case of a continuum of types. Bunching at the lower end of the talent scale is a feature of the solution for sufficiently high degrees of inequality aversion.
(This abstract was borrowed from another version of this item.)
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 33 1 34 25 60 63
Fax: 33 1 34 25 62 33
Web page: http://thema.u-cergy.fr
More information through EDIRC
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.:
- Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
- De Fraja, Gianni, 1998.
"The Design of Optimal Education Policies,"
CEPR Discussion Papers
1792, C.E.P.R. Discussion Papers.
- Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
- Lollivier, Stefan & Rochet, Jean-Charles, 1983. "Bunching and second-order conditions: A note on optimal tax theory," Journal of Economic Theory, Elsevier, vol. 31(2), pages 392-400, December.
- Arrow, Kenneth J, 1971. "A Utilitarian Approach to the Concept of Equality in Public Expenditure," The Quarterly Journal of Economics, MIT Press, vol. 85(3), pages 409-15, August.
- Caroline Minter Hoxby, 1994. "Do Private Schools Provide Competition for Public Schools?," NBER Working Papers 4978, National Bureau of Economic Research, Inc.
- Hare, P G & Ulph, D T, 1979. "On Education and Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S193-212, October.
- Weymark, John A, 1987. "Comparative Static Properties of Optimal Nonlinear Income Taxes," Econometrica, Econometric Society, vol. 55(5), pages 1165-85, September.
- Hoxby, Caroline M., 1999. "The productivity of schools and other local public goods producers," Journal of Public Economics, Elsevier, vol. 74(1), pages 1-30, October.
- Guesnerie, Roger & Seade, Jesus, 1982.
"Nonlinear pricing in a finite economy,"
Journal of Public Economics,
Elsevier, vol. 17(2), pages 157-179, March.
- MONGIN, Philippe & d ASPREMONT, Claude, 1996.
"Utility theory and ethics,"
CORE Discussion Papers
1996063, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Mongin, P & d'Aspremont, C, 1996. "Utility Theory and Ethics," Papers 9632, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
- MONGIN, Philippe & d'ASPREMONT, Claude, . "Utility theory and ethics," CORE Discussion Papers RP -1423, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- P. Mongin & C. d'Aspremont, 1996. "Utility theory and ethics," THEMA Working Papers 96-32, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Besley, T. & Coate, S., 1991.
"The Design Of Income Maintenance Programs,"
74, Princeton, Woodrow Wilson School - John M. Olin Program.
- Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
- Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
- Ebert, Udo, 1992. "A reexamination of the optimal nonlinear income tax," Journal of Public Economics, Elsevier, vol. 49(1), pages 47-73, October.
- Tuomala, Matti, 1986. "On the optimal income taxation and educational decisions," Journal of Public Economics, Elsevier, vol. 30(2), pages 183-198, July.
- Ulph, David, 1977. "On the optimal distribution of income and educational expenditure," Journal of Public Economics, Elsevier, vol. 8(3), pages 341-356, December.
- Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
- Weymark, John A., 1986. "A reduced-form optimal nonlinear income tax problem," Journal of Public Economics, Elsevier, vol. 30(2), pages 199-217, July.
- Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
- Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
- Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
- Bruno, Michael, 1976. "Equality, complementarity and the incidence of public expenditures," Journal of Public Economics, Elsevier, vol. 6(4), pages 395-407, November.
When requesting a correction, please mention this item's handle: RePEc:ema:worpap:2000-14. 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: (Marion Oury)The email address of this maintainer does not seem to be valid anymore. Please ask Marion Oury to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.