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Optimal Policy Towards Families with Di¤erent Amounts of Social Capital, in the Presence of Asymmetric Information and Stochastic Fertility

Alessandro Cigno () and Annalisa Luporini ()

CHILD Working Papers from CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY

Abstract: We examine the effects of di¤erences in social capital on first and second best transfers to families with children, in an asym- metric information context where the number of births, and the future earning capacity of each child that is born, are random variables. The probability that a couple has children is con- ditional on the level of reproductive activity undertaken. The probability that a child will have high earning ability is positively conditioned not only by the level of educational investment un- dertaken by the child's parents, but also by the social capital of the latter. The optimal policy includes two transfers, one con- ditional on number of births, the other on the children's earning ability.

Keywords: education; stochastic fertility; child benefits; pensions; scholarships; social capital; asymmetric information; multi-agency (search for similar items in EconPapers)
JEL-codes: D13 D78 D82 H31 J13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-soc
Date: 2006-01
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