Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/26496 
Authors: 
Year of Publication: 
2008
Series/Report no.: 
CESifo Working Paper No. 2451
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper considers how optimal education and tax policy depends on the risk properties of human capital. It is demonstrated that a key feature of human capital investments is whether they increase or decrease wage risk. In a benchmark model it is shown that this feature alone determines whether a constrained optimal allocation should be characterized by a positive or a negative education premium. In the same model a positive intertemporal wedge is optimal. A set of generalizations, including non-observability of education, non-observability of consumption, and temporal resolution of uncertainty, are then considered to examine the robustness of these results.
Subjects: 
Education
optimal taxation
risk
JEL: 
D81
H21
I21
Document Type: 
Working Paper
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