Intergenerational Transmission of Skills During Childhood and Optimal Public Policy

49 Pages Posted: 14 Feb 2011

See all articles by Alessandra Casarico

Alessandra Casarico

Bocconi University - Department of Policy Analysis and Public Management; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Luca Micheletto

University of Milan

Alessandro Sommacal

Universite Catholique de Louvain - Institut de Recherches Economiques et Sociales (IRES)

Date Written: February 14, 2011

Abstract

The paper characterizes the optimal tax policy and the optimal quality of day care services in a OLG model with warm-glow altruism where parental choices over child care arrangements affect the probability that the child becomes a high-skilled adult in a type-specific way. With respect to previous contributions, optimal tax formulas include type-specific Pigouvian terms which correct for the intergenerational externality in human capital accumulation. Our numerical simulations suggest that a public policy that disregards the effects of parental time on children's human capital entails a welfare loss that ranges from 0:2% to 5:7% of aggregate consumption.

Keywords: optimal taxation, day care quality, intergenerational transmission of skills, early childhood environment, warm-glow

JEL Classification: H210, H230, J130, J220, J240

Suggested Citation

Casarico, Alessandra and Micheletto, Luca and Sommacal, Alessandro, Intergenerational Transmission of Skills During Childhood and Optimal Public Policy (February 14, 2011). CESifo Working Paper Series No. 3343. Available at SSRN: https://ssrn.com/abstract=1761214

Alessandra Casarico (Contact Author)

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Luca Micheletto

University of Milan ( email )

Via Festa del Perdono, 7
Milan, 20122
Italy

Alessandro Sommacal

Universite Catholique de Louvain - Institut de Recherches Economiques et Sociales (IRES) ( email )

3, Place Montesquieu
1348 Louvain-la-Neuve
Belgium

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