Should education be subsidized?

An efficiency argument for public subsidies to education is proposed in this study. Subsidizing education is shown to be welfare improving because it makes the tax system less distortionary. Income taxation causes a less than efficient amount of investment in human capital, and induces an inefficient mix of human capital investments. Taxation causes too few goods, and relatively too much time, to be invested in human capital. Lowering the private cost of goods invested in human capital counteracts these tar distortions thus it can be efficient to subsidize education

The effect of deficit finance on human capital

This study examines the effect of structural budget deficits on investment in human capital in a perfect-foresight model. This effect is shown to be significantly negative. This disinvestment in human capital is also shown to cause an important initial substitution toward work, consumption, and investment in physical capital. Thus the initial stimulative effect of deficits on economic activity is magnified. The long-run detrimental effects of deficits on these variables, however, are also magnified by the effect on human capital. In addition, the effect on human capital is shown to significantly increase the welfare cost of deficit finance

A dynamic Mincer equation with an application to Portuguese data

This article argues in favour of a dynamic specification of the Mincer equation, where the past observed earnings play the role of additional explanatory variable for current observed earnings. A dynamic approach offers an explanation why the return to schooling in terms of observed earnings is not independent of labour-market experience, as suggested by some recent empirical evidence for the United States.