EconStor >
ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/46367
  
Title:Shutting the stable door after the horse has bolted? On educational risk and the quality of education PDF Logo
Authors:Schindler, Dirk
Weigert, Benjamin
Issue Date:2011
Series/Report no.:CESifo working paper: Public Finance 3436
Abstract:We analyze whether a redistributive government should provide ex ante insurance against unfortunate outcomes or whether it should instead rely on transfers for redistributing income ex post. To this end, we develop a model of education in which individuals face educational risk and wage dispersion across two types of skills. Successful graduation and working as a skilled worker depends on individual effort in education and on public resources, but educational risk still causes (income) inequality. We show that in a second-best setting, in which learning effort is not observable, improving the quality of education by public funding of the educational sector has a significant effect and that this increases efficiency in comparison to a pure (linear) income tax with income transfers from skilled to unskilled workers. Compared to a first-best solution, providing ex ante insurance significantly gains importance relative to traditional ex post redistribution, because it simultaneously alleviates moral hazard in education. These results are strengthened when a (distortionary) skill-specific tax can be implemented.
Subjects:human capital investment
endogenous risk
learning effort
optimal taxation
public education
JEL:H21
I20
J20
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

Files in This Item:
File Description SizeFormat
660774348.pdf279.02 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/46367

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.