Working Paper, Department of Economics, Uppsala University 2001:6
This is a theoretical study of human-capital accumulation, where parental, as well as public investments are essential. Policy influence rich and poor parents differently when they make educational decisions. Rich parents allocate resources efficiently between physical bequests and educational investments, while poor parents only afford investments in children's human capital. Therefore, educational equality between rich and poor children is not necessarily promoted by further investments in public schooling. Moreover, I show that educational investments in low-skilled parents may have substantial spill-over effects on their children. Tax policy may also be used to influence human-capital accumulation, and I show that tax policy may have unexpected effects on the educational gap between rich and poor children.