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Human capital and optimal redistribution

Winfried Koeniger and Julien Prat

No 497, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: 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.

Keywords: human capital; optimal taxation (search for similar items in EconPapers)
JEL-codes: E24 H21 I22 J24 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cta, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.econstor.eu/bitstream/10419/103959/1/805017895.pdf (application/pdf)

Related works:
Journal Article: Human Capital and Optimal Redistribution (2018) Downloads
Working Paper: Human Capital and Optimal Redistribution (2017) Downloads
Working Paper: Human Capital and Optimal Redistribution (2015) Downloads
Working Paper: Human Capital and Optimal Redistribution (2014) Downloads
Working Paper: Human Capital and Optimal Redistribution (2014) Downloads
Working Paper: Human Capital and Optimal Redistribution (2014) Downloads
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