Optimal Family Policy in the Presence of Moral Hazard, When the Quantity and Quality of Children are Stochastic

18 Pages Posted: 26 May 2009

See all articles by Alessandro Cigno

Alessandro Cigno

Department of Economics and Management, University of Florence; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics; Centre for Household, Income, Labour and Demographic Economics (CHILD)

Annalisa Luporini

University of Florence - Dipartimento di Scienze Economiche; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

We examine the second-best family policy under the assumption that both the number and the future earning capacities of the children born to a couple are random variables with probability distributions conditional on unobservable parental actions. Potential parents take their decisions without taking into account the effects of these actions on the government's future tax revenue. The second-best policy provides parents with credit and insurance, and allows them to appropriate the external benefits of their actions.

Keywords: stochastic quantity and quality of children, moral hazard, population externalities, family allowances, scholarships, pensions

JEL Classification: D13, D78, D82, H31, J13

Suggested Citation

Cigno, Alessandro and Luporini, Annalisa, Optimal Family Policy in the Presence of Moral Hazard, When the Quantity and Quality of Children are Stochastic. IZA Discussion Paper No. 4179, Available at SSRN: https://ssrn.com/abstract=1409283 or http://dx.doi.org/10.2139/ssrn.1409283

Alessandro Cigno (Contact Author)

Department of Economics and Management, University of Florence ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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HOME PAGE: http://www.CESifo.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
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Centre for Household, Income, Labour and Demographic Economics (CHILD) ( email )

Turin, TO
Italy

Annalisa Luporini

University of Florence - Dipartimento di Scienze Economiche ( email )

via delle Pandette 9
Florence 50127
Italy

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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