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Title:Efficient education policy: A second-order elasticity rule PDF Logo
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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