Why to Invest in your Neighbor? Social Contract on Educational Investment

Panu Poutvaara and Vesa Kanniainen

University of Helsinki, Department of Economics from Department of Economics

Abstract: It may be in the interest of low-ability individuals to subsidize the education of high-ability individuals. Sufficient conditions are surprisingly mild: positive externalities in education and complementarity in production between human capital and labor supplied by the low-ability individuals. However, tax competition and the free mobility of the educated give rise to time-inconsistency and free-riding problems which render such a social contract infeasible and result in a suboptimally low investment in education.

Keywords: EDUCATION; CONTRACTS; SOCIETY; TAXATION (search for similar items in EconPapers)
JEL-codes: H2 H52 I21 J24 (search for similar items in EconPapers)
Pages: 17 pages
Date: 1999
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Why Invest in Your Neighbor? Social Contract on Educational Investment (2000)
Working Paper: Why invest in your neighbor? Social contract on educational investment (2000)
Working Paper: Why to Invest in your Neighbor? Social Contract on Educational Investment (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:helsec:462

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