The Design of Optimal Education Policies

Gianni De Fraja

No 1792, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper studies the optimal education policy of a budget-constrained utilitarian government. Households differ in their income and in the intellectual ability of their children; income is observed by the government, but ability is private information. Households can choose to use private education, but cannot borrow to finance it. The results we obtain are striking. The optimal education policy is elitist: it increases the spread between the education achievement of the bright and the less bright children, compared to both private provision and the first-best policy. It is also such that the education received by a child depends positively on their parental income, unless they are bright. Finally, the optimal education policy is input regressive, in the sense of Arrow (1971): households with higher income and brighter children contribute less towards the cost of the education system than households with lower income and less bright children.

Keywords: Education; Redistribution; student loans; tuition fees (search for similar items in EconPapers)
JEL-codes: D82 H21 I22 I28 (search for similar items in EconPapers)
Date: 1998-01
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1792 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: The Design of Optimal Education Policies (2002)
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:cpr:ceprdp:1792

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1792

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().