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Optimal educational choice and redistribution when cultural background matters

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Abstract

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

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  • Elena Del Rey & Marìa del Mar Racionero, 2001. "Optimal educational choice and redistribution when cultural background matters," CSEF Working Papers 59, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:59
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    1. Barham, Vicky & Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1995. "Education and the poverty trap," European Economic Review, Elsevier, vol. 39(7), pages 1257-1275, August.
    2. Hamada, Koichi, 1974. "Income taxation and educational subsidy," Journal of Public Economics, Elsevier, vol. 3(2), pages 145-158, May.
    3. George J. Borjas, 2021. "Ethnic Capital And Intergenerational Mobility," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 6, pages 107-134, World Scientific Publishing Co. Pte. Ltd..
    4. Hare, P G & Ulph, D T, 1979. "On Education and Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 193-212, October.
    5. Torvik, Ragnar, 1993. " Talent, Growth and Income Distribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 581-596, December.
    6. Bowles, Samuel, 1972. "Schooling and Inequality from Generation to Generation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 219-251, Part II, .
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    More about this item

    Keywords

    Optimal linear income tax; Subsidies; Higher education; Educational background;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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