Human capital and optimal redistribution

Arbeitspapier

We characterize optimal redistribution in a dynastic family model with human capital. We show how a government can improve 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 human capital carries risk: its returns depend on the non-diversifiable risk of children's ability. Thus, human capital investment is encouraged more than bequests in the social optimum if human capital is a bad hedge for consumption risk.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper Series ; No. 497

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Educational Finance; Financial Aid ; Human Capital; Skills; Occupational Choice; Labor Productivity
• Subject: human capital ; optimal taxation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Koeniger, Winfried ; Prat, Julien
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/103959
• URN: urn:nbn:de:hebis:30:3-356112
• Last update: 10.03.2025, 11:44 AM CET