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The Design of Optimal Education Policies

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Author Info
De Fraja, Gianni

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Abstract

This paper studies the education policy chosen by a utilitarian government. In the model, households differ in their income and in their children's ability; income is observed by the government, but ability is private information. Households can use private education, but cannot borrow to finance it. The government can finance education with income tax, but at the cost of blunting the individuals' incentive to exert labour market effort. The optimal education policy we derive is elitist: it increases the spread between the educational achievement of the bright and the less bright individuals, compared to private provision. It is also such that the education received by less bright individuals depends positively on their parental income. Finally, the optimal education policy is input regressive, in the sense of Arrow (1971): households with higher income and brighter children contribute less in tuition fees towards the cost of the education system than households with lower income and less bright children. Copyright 2002 by The Review of Economic Studies Limited

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 69 (2002)
Issue (Month): 2 (April)
Pages: 437-66
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Handle: RePEc:bla:restud:v:69:y:2002:i:2:p:437-66

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  1. Dominique Henriet & Jean-Charles Rochet, 2006. "Is public health insurance an appropriate instrument for redistribution?," Annales d'Economie et de Statistique, ADRES, issue 83-84, pages 03, Juillet-D. [Downloadable!]
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  2. Brunello, Giorgio & Rocco, Lorenzo, 2004. "Diploma No Problem: Can Private Schools Be of Lower Quality than Public Schools?," IZA Discussion Papers 1336, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Giorgio BRUNELLO & Daniele CHECCHI, 2005. "School vouchers Italian style," Departemental Working Papers 2005-06, Department of Economics University of Milan Italy. [Downloadable!]
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  4. Alberto Bennardo & Salvatore Piccolo, 2005. "Competitive Markets with Endogenous Health Risks," CSEF Working Papers 145, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
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  5. Fleurbaey, Marc & Gary-Bobo, Robert J. & Maguain, Denis, 2002. "Education, Distributive Justice and Adverse Selection," CEPR Discussion Papers 2897, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Simona GRASSI, 2006. "On the characteristics of a mixed system of provision of a private good. An application to health care," Departemental Working Papers 2006-14, Department of Economics University of Milan Italy. [Downloadable!]
  7. Dario Maldonado, 2007. "The design of optimal education policies when individuals differ in inherited wealth and ability," DOCUMENTOS DE TRABAJO 003975, UNIVERSIDAD DEL ROSARIO - FACULTAD DE ECONOMÍA. [Downloadable!]
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  8. Cremer, Helmuth & Pestieau, Pierre, 2004. "Intergenerational Transfer of Human Capital and Optimal Education Policy," CEPR Discussion Papers 4201, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Pablo D. López Zadicoff, 2006. "Universidad Pública, Abierta y Gratuita: Análisis de factores cruciales para la evaluación de esta política pública," CEMA Working Papers: Serie Documentos de Trabajo. 333, Universidad del CEMA. [Downloadable!]
  10. Tomer Blumkin & Efraim Sadka, 2008. "A case for taxing education," International Tax and Public Finance, Springer, vol. 15(2), pages 145-163, April. [Downloadable!] (restricted)
  11. Lorraine Dearden & Emla Fitzsimons & Alissa Goodman & Greg Kaplan, 2007. "Higher education funding reforms in England: the distributional effects and the shifting balance of costs," IFS Working Papers W07/18, Institute for Fiscal Studies. [Downloadable!]
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  12. Giorgio Brunello & Massimo Giannini, 2001. "Stratified or Comprehensive? The Economic Efficiency of School Design," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  13. Darío Maldonado, 2008. "Education policies and optimal taxation," International Tax and Public Finance, Springer, vol. 15(2), pages 131-143, April. [Downloadable!] (restricted)
  14. Oscar Marcenaro-Gutierrez & Fernando Galindo-Rueda & Anna Vignoles, 2007. "Who actually goes to university?," Empirical Economics, Springer, vol. 32(2), pages 333-357, May. [Downloadable!] (restricted)
  15. De Fraja, Gianni, 2002. "Affirmative Action and Efficiency in Education," CEPR Discussion Papers 3357, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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