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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/30725
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| Title: | | Efficient education policy: A second-order elasticity rule  |
| Authors: | | Richter, Wolfram F. |
| Issue Date: | | 2010 |
| Series/Report no.: | | CESifo working paper 2969 |
| Abstract: | | Assuming a two-period model with endogenous choices of labour, education, and saving, efficient education policy is characterized for a Ramsey-like scenario in which the government is constrained to use linear instruments. It is shown that education should be effectively subsidized if, and only if, the elasticity of the earnings function is increasing in education. The strength of second-best subsidization increases in the elasticity of the elasticity of the earnings function. This second-order elasticity rule extends the well-known Ramsey-Boiteux Inverse Elasticity Rule. |
| Subjects: | | endogenous choice of education labour, and saving second-best efficient taxation linear instruments finite periods Ramsey's Rule Inverse Elasticity Rule |
| JEL: | | H21 I28 J24 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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