Education choice under uncertainty: implications for public policy

Vincent Hogan () and Ian Walker ()

No 200615, Working Papers from School of Economics, University College Dublin

Abstract: We analyse how progressive taxation and education subsidies affect schooling decisions when the returns to education are stochastic. We use the theory of real options to solve the problem of education choice in a dynamic stochastic model. We show that education attainment will be an increasing function of the risk associated with education. Furthermore, this result holds regardless of the degree of risk aversion. We also show that progressive taxes will tend to increase education attainment.

Keywords: Education choice; Dynamic optimization; Optimal stopping; Uncertainty; Education and state--Great Britain; Human capital; Education and state--Europe (search for similar items in EconPapers)
JEL-codes: C61 D81 J24 (search for similar items in EconPapers)
Date: 2006-11
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Citations: View citations in EconPapers (10)

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http://hdl.handle.net/10197/953 First version, 2006 (application/pdf)

Related works:
Journal Article: Education choice under uncertainty: Implications for public policy (2007)
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