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Optimal educational choice and redistribution when cultural background matters

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Abstract

Higher education plays an important role in determining lifetime earnings. In turn, the decision to become educated depends to a large extent on family characteristics, such as wealth and cultural background. In this paper, we focus on the interaction between fiscal policies and educational choices when cultural background matters. We derive optimality conditions for a linear income tax and a lump-sum subsidy for education in a dynamic framework in which generations are linked by cultural background. The factors that determine their sign and magnitude include concerns for redistribution, efficiency, and the educational externality on future generations

Suggested Citation

  • Elena Del Rey & Marìa del Mar Racionero, 2001. "Optimal educational choice and redistribution when cultural background matters," CSEF Working Papers 59, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:59
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    File URL: http://www.csef.it/WP/wp59.pdf
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    1. Torvik, Ragnar, 1993. " Talent, Growth and Income Distribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 581-596, December.
    2. Barham, Vicky & Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1995. "Education and the poverty trap," European Economic Review, Elsevier, vol. 39(7), pages 1257-1275, August.
    3. George J. Borjas, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 123-150.
    4. Bowles, Samuel, 1972. "Schooling and Inequality from Generation to Generation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 219-251, Part II, .
    5. Hamada, Koichi, 1974. "Income taxation and educational subsidy," Journal of Public Economics, Elsevier, vol. 3(2), pages 145-158, May.
    6. Hare, P G & Ulph, D T, 1979. "On Education and Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 193-212, October.
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    More about this item

    Keywords

    Optimal linear income tax; Subsidies; Higher education; Educational background;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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