The risk-properties of human capital and the design of government policies

Carlos Eugênio da Costa () and Lucas Maestri

No 554, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: Whether human capital increases or decreases wage uncertainty is an open question from an empirical standpoint. Yet, most policy prescriptions regarding human capital formation are based on models that impose riskiness on this type of investment. In a two period and finite type optimal income taxation problem we derive prescriptions that are robust to the risk characteristics of human capital: savings should be discouraged, human capital investments encouraged and both types of investment driven to an efficient level from an aggregate perspective. These prescriptions are also robust to the assumptions regarding what choices are observed, despite policy instruments being not.

Date: 2004-07-01
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Citations: View citations in EconPapers (16)

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Journal Article: The risk properties of human capital and the design of government policies (2007)
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