Optimal Policy and the Risk-Properties of Human Capital Reconsidered

Dan Anderberg

No 166, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: This paper considers how optimal education and tax policy depends on the risk properties of human capital. It is demonstrated that a key feature of human capital investments is whether they increase or decrease wage risk. In a benchmark model it is shown that this feature alone determines whether a constrained optimal allocation should be characterized by a positive or a negative education premium. In the same model a positive intertemporal wedge is optimal. A set of generalizations, including non-observability of education, non-observability of consumption, and temporal resolution of uncertainty, are then considered to examine the robustness of these results.

Date: 2009
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Related works:
Journal Article: Optimal policy and the risk properties of human capital reconsidered (2009)
Working Paper: Optimal Policy and the Risk Properties of Human Capital Reconsidered (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed009:166

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