Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72392
Authors: 
Hogan, Vincent
Walker, Ian
Year of Publication: 
2006
Series/Report no.: 
Working Paper Series, UCD Centre for Economic Research 06/15
Abstract: 
We analyse how progressive taxation and education subsidies affect schooling decisions when the returns to education are stochastic. We use the theory of real options to solve the problem of education choice in a dynamic stochastic model. We show that education attainment will be an increasing function of the risk associated with education. Furthermore, this result holds regardless of the degree of risk aversion. We also show that progressive taxes will tend to increase education attainment.
Subjects: 
Education Choice
Dynamic Optimization
Optimal Stopping
Uncertainty
JEL: 
J24
C61
D81
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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