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Education and lifetime income during demographic transition

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  • Pfeiffer, Friedhelm
  • Reuß, Karsten

Abstract

The paper studies the power of educational investments in relation to transfers for fostering lifetime income and for reducing income inequality in Germany. The welfare analysis is based on a model of age-dependent human capital accumulation, featuring dynamic complementarities in skill formation over the life cycle, and calibrated for the period of ongoing demographic transition until 2080. If policy aims at reducing the inequality of lifetime income among people of the same generation, educational investments for people younger than or equal to seventeen do a better job compared to transfers in adulthood. In an intergenerational perspective all cohorts born after 1976 will gain from tax-financed additional investments in preschooleducation introduced in 2011. Additional investments into secondary education will, as a rule, not cause life time income to raise enough to compensate its costs.

Suggested Citation

  • Pfeiffer, Friedhelm & Reuß, Karsten, 2013. "Education and lifetime income during demographic transition," ZEW Discussion Papers 13-021, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:13021
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    References listed on IDEAS

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    5. Coneus, Katja & Laucht, Manfred & Reuß, Karsten, 2012. "The role of parental investments for cognitive and noncognitive skill formation—Evidence for the first 11 years of life," Economics & Human Biology, Elsevier, vol. 10(2), pages 189-209.
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    More about this item

    Keywords

    early education; demographic change; inequality over the life span; redistributive policy;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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