Human Capital and Optimal Redistribution

Winfried Koeniger and Julien Prat

Review of Economic Dynamics, 2018, vol. 27, 1-26

Abstract: We characterize optimal redistribution in a dynastic economy with observable human capital and hidden ability. We show that the wedge between human capital investment in the laissez faire and the social optimum differs from the wedge for bequests because (i) returns to human capital are risky, and (ii) human capital may change informational rents. We compute the optimal allocation when ability is persistent across generations, as calibrated for the U.S. We show how the allocation can be implemented with student loans featuring contingent repayments. The quantitative results reveal that human capital investment should (i) increase in parental income because of ability transmission across generations, but (ii) decrease in inherited assets because of the negative effect of wealth on labor supply. (Copyright: Elsevier)

Keywords: Human capital; Bequests; Optimal taxation; Asymmetric information; Intergenerational equity; Student loans (search for similar items in EconPapers)
JEL-codes: E24 H21 I22 J24 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2017.10.002
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.

Related works:
Software Item: Code and data files for "Human Capital and Optimal Redistribution" (2017)
Working Paper: Human Capital and Optimal Redistribution (2017)
Working Paper: Human Capital and Optimal Redistribution (2015)
Working Paper: Human Capital and Optimal Redistribution (2015)
Working Paper: Human Capital and Optimal Redistribution (2014)
Working Paper: Human Capital and Optimal Redistribution (2014)
Working Paper: Human capital and optimal redistribution (2014)
Working Paper: Human Capital and Optimal Redistribution (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:15-273

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2017.10.002

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().