Business Economics and Public Policy Papers

Document Type

Journal Article

Date of this Version

8-2012

Publication Source

Journal of Public Economic Theory

Volume

14

Issue

4

Start Page

601

Last Page

623

DOI

10.1111/j.1467-9779.2012.01554.x

Abstract

In this paper, we study optimal educational policies when the ability to benefit from education is private information. We extend the framework of De Fraja (2002) in two directions. First, we replace his specification of the government’s budget constraint, which prevents the government to use tax revenues from an older generation to subsidize the education of a younger generation, by the usual one. We show that the optimal educational policies achieve the first best, are not regressive, and can be decentralized through Pigouvian taxes and credit provision. Second, we consider utility functions that are not quasi-linear. In this case, we show that the first best can no longer be reached, education may not be monotonic in ability, and progressivities of education are locally welfare-improving.

Copyright/Permission Statement

This is the peer reviewed version of the following article: Gottlieb, Daniel and Humberto Moreira. “Should Educational Policies Be Regressive?” Journal of Public Economic Theory, Volume 14, Issue 4, August 2012, pp. 601-623 ,which has been published in final form at http://dx.doi.org/10.1111/j.1467-9779.2012.01554.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving: http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.

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Date Posted: 27 November 2017

This document has been peer reviewed.