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Optimal Policy Towards Families with Di¤erent Amounts of Social Capital, in the Presence of Asymmetric Information and Stochastic Fertility

  • Alessandro Cigno


  • Annalisa Luporini


We examine the effects of di¤erences in social capital on first and second best transfers to families with children, in an asym- metric information context where the number of births, and the future earning capacity of each child that is born, are random variables. The probability that a couple has children is con- ditional on the level of reproductive activity undertaken. The probability that a child will have high earning ability is positively conditioned not only by the level of educational investment un- dertaken by the child's parents, but also by the social capital of the latter. The optimal policy includes two transfers, one con- ditional on number of births, the other on the children's earning ability.

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Paper provided by CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY in its series CHILD Working Papers with number wp03_06.

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Length: 24 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:wpc:wplist:wp03_06
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  1. Peters, Wolfgang, 1995. "Public Pensions, Family Allowances and Endogenous Demographic Change," Journal of Population Economics, Springer;European Society for Population Economics, vol. 8(2), pages 161-83, May.
  2. Cigno, Alessandro, 2006. "The political economy of intergenerational cooperation," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  3. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2004. "Hidden information problems in the design of family allowances," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(4), pages 645-655, December.
  4. Cigno, Alessandro, 1993. "Intergenerational transfers without altruism : Family, market and state," European Journal of Political Economy, Elsevier, vol. 9(4), pages 505-518, November.
  5. CREMER, Helmuth & DELLIS, Arnaud & PESTIEAU, Pierre, 2001. "Family size and optimal income taxation," CORE Discussion Papers 2001021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Annalisa Luporini, 2006. "Relative performance evaluation in a multi-plant firm," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(1), pages 235-243, 05.
  7. Cigno, Alessandro & Pettini, Anna, 2002. "Taxing family size and subsidizing child-specific commodities?," Journal of Public Economics, Elsevier, vol. 84(1), pages 75-90, April.
  8. Alessandro Cigno & Annalisa Luporini & Anna Pettini, 2000. "Transfers to Families with Children as a Principal-Agent Problem," CESifo Working Paper Series 351, CESifo Group Munich.
  9. Alessandro Balestrino & Alessandro Cigno & Anna Pettini, 2002. "Endogenous Fertility and the Design of Family Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(2), pages 175-193, March.
  10. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1335-1357, July.
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