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Intergenerational transmission of skills during childhood and optimal public policy

  • Casarico, Alessandra

    ()

    (Bocconi University)

  • Micheletto, Luca

    ()

    (Uppsala Center for Fiscal Studies)

  • Sommacal, Alessandro

    ()

    (Faculty of Economics, University of Verona)

The paper characterizes the optimal tax policy and the optimal quality of day care services in a OLG model with warm-glow altruism where parental choices over child care arrangements affect the probability that the child becomes a high-skilled adult in a type-specific way. With respect to previous contributions, optimal tax formulas include type-specific Pigouvian terms which correct for the intergenerational externality in human capital accumulation. Our numerical simulations suggest that a public policy that disregards the effects of parental time on children's human capital entails a welfare loss that ranges from 0:2% to 5:7% of aggregate consumption.

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File URL: http://www.nek.uu.se/Pdf/wp20113ucfs.pdf
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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2011:3.

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Length: 53 pages
Date of creation: 04 Feb 2011
Date of revision:
Publication status: Published as Casarico, Alessandra, Luca Micheletto and Alessandro Sommacal, 'Intergenerational transmission of skills during childhood and optimal public policy' in Journal of Population Economics , 2015, pages 353-372.
Handle: RePEc:hhs:uufswp:2011_003
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Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden

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Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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