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Intergenerational Transfer of Human Capital and Optimal Education Policy
Author(s) -
CREMER HELMUTH,
PESTIEAU PIERRE
Publication year - 2006
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2006.00276.x
Subject(s) - economics , subsidy , altruism (biology) , investment (military) , welfare , crowding out , microeconomics , human capital , term (time) , paternalism , public economics , monetary economics , market economy , social psychology , psychology , physics , quantum mechanics , politics , political science , law
We study the design of education policies (subsidies and public education) when parents' investment in education is motivated by warm‐glow altruism and determines the probability that a child has a high ability. The optimal subsidy is not necessarily positive. It is determined by two conflicting terms: a Pigouvian term (warm‐glow altruists do not properly account for the impact of education on future generations) and a “paternalistic” effect (the warm‐glow term may not be fully included in social welfare). Finally, total crowding out of private expenditure (for one of the types) by public education may be desirable.