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Education and lifetime income during demographic transition

  • Pfeiffer, Friedhelm
  • Reuß, Karsten

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.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-021.

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Date of creation: 2013
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Handle: RePEc:zbw:zewdip:13021
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  1. James Heckman & Pedro Carneiro & Flavio Cunha, 2004. "The Technology of Skill Formation," 2004 Meeting Papers 681, Society for Economic Dynamics.
  2. Edgar Vogel & Alexander Ludwig & Axel Börsch-Supan, 2013. "Aging and Pension Reform: Extending the Retirement Age and Human Capital Formation," Working Paper Series in Economics 59, University of Cologne, Department of Economics.
  3. Cunha, Flavio & Heckman, James, 2008. "A New Framework For The Analysis Of Inequality," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 315-354, September.
  4. Dorothea Blomeyer & Katja Coneus & Manfred Laucht & Friedhelm Pfeiffer, 2012. "Early Life Adversity and Children's Competence Development: Evidence from the Mannheim Study of Children at Risk," Working Papers 2012-020, Human Capital and Economic Opportunity Working Group.
  5. Diego Restuccia & Carlos Urrutia, 2002. "Intergenerational Persistence of Earnings: The Role of Early and College Education," Working Papers diegor-02-03, University of Toronto, Department of Economics.
  6. Alexander Kemnitz & Robert K. von Weizsäcker, 2003. "Bildungsreform in der Demokratie," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(2), pages 188-204.
  7. Dorothea Blomeyer & Katja Coneus & Manfred Laucht & Friedhelm Pfeiffer, 2009. "Initial Risk Matrix, Home Resources, Ability Development, and Children's Achievement," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 638-648, 04-05.
  8. Flavio Cunha & James J. Heckman, 2009. "The Economics and Psychology of Inequality and Human DEvelopment," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 320-364, 04-05.
  9. Pfeiffer, Friedhelm & Reuß, Karsten, 2007. "Age-dependent Skill Formation and Returns to Education," ZEW Discussion Papers 07-015, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Pfeiffer, Friedhelm & Gernandt, Johannes, 2007. "Rising Wage Inequality in Germany," ZEW Discussion Papers 06-019 [rev.2], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Hanushek, Eric A. & Wößmann, Ludger, 2008. "The role of cognitive skills in economic development," Munich Reprints in Economics 20454, University of Munich, Department of Economics.
  12. Tom Krebs, 2003. "Human Capital Risk And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 709-744, May.
  13. Flavio Cunha & James J. Heckman, 2008. "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
  14. Börsch-Supan, Axel & Reil-Held, Anette & Schunk, Daniel, 2008. "Saving incentives, old-age provision and displacement effects: evidence from the recent German pension reform," Journal of Pension Economics and Finance, Cambridge University Press, vol. 7(03), pages 295-319, November.
  15. repec:mea:meawpa:12257 is not listed on IDEAS
  16. 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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