Optimal educational choice and redistribution when cultural background matters
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
|Date of creation:||01 Jun 2001|
|Publication status:||Published in Oxford Economic Papers 2002, vol. 54, pages 435-448|
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