Human Capital and Optimal Redistribution

Julien Prat and Winfried Koeniger
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Winfried Koeniger: University of St.Gallen

No 794, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: We characterize optimal redistribution in a dynastic family model with human capital. We show how the government can affect the trade-off between equality and incentives by changing the amount of observable human capital. We provide an intuitive decomposition for the wedge between human-capital investment in the laissez faire and the social optimum. This wedge differs from the wedge for bequests because: (i) returns to human capital depend on the non-insurable risk associated with children's abilities, (ii) human capital may improve or worsen the incentive problem depending on its degree of complementarity with innate ability.

Date: 2015
New Economics Papers: this item is included in nep-dge and nep-hrm
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Related works:
Journal Article: Human Capital and Optimal Redistribution (2018)
Working Paper: Human Capital and Optimal Redistribution (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:794

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