Should Educational Policies Be Regressive?.(Report) Gottlieb, Daniel; Moreira, Humberto Luiz Ataide

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Gottlieb, Daniel ; Moreira, Humberto Luiz Ataide
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Journal of Public Economic Theory
Universities and colleges; Colleges, Universities, and Professional Schools; Education policy
To purchase or authenticate to the full-text of this article, please visit this link: Byline: DANIEL GOTTLIEB(1), HUMBERTO MOREIRA(2) 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. Author Affiliation: (1)Wharton School, University of Pennsylvania (2)Graduate School of Economics, Getulio Vargas Foundation Article Note: Daniel Gottlieb, Wharton School, University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA 19104 (e-mail: Humberto Moreira, Graduate School of Economics, Getulio Vargas Foundation, Praia de Botafogo 190, Rio de Janeiro, RJ, Brazil 22253-900. We thank Luis Braido, Carlos da Costa, Daniel Ferreira, Andrew Horowitz, Rodrigo Soares, Thierry Verdier, an associate editor, and especially Antoine Bommier, Pierre Dubois, James Poterba, and Myrna Wooders (editor) for helpful comments and suggestions. Received December 17, 2009; Accepted October 21, 2010.
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