Education choice under uncertainty : implications for public policy

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Title: Education choice under uncertainty : implications for public policy
Authors: Hogan, Vincent (Vincent Peter)
Walker, Ian
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Date: Nov-2006
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.
Funding Details: Marie Curie Fellowship of the European Union programme “Improving Human Resource Potential and the Socio-Economic Knowledge Base” under contract HPMF-CT-2000-00879; Centre for the Economics of Education, Department of Education and Skills
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP06/15
Copyright (published version): UCD School of Economics 2006
Keywords: Education choiceDynamic optimizationOptimal stoppingUncertainty
Subject LCSH: Education and state--Great Britain
Human capital
Education and state--Europe
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Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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