Intergenerational Transmission of Skills During Childhood and Optimal Public Policy

ECONPUBBLICA Working Paper No. 154

55 Pages Posted: 1 Mar 2012

See all articles by Alessandra Casarico

Alessandra Casarico

Bocconi University - Department of Policy Analysis and Public Management

Luca Micheletto

Bocconi University

Alessandro Sommacal

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

Date Written: February 1, 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-speciffc way. With respect to previous contributions, optimal tax formulas include type-speciffc 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: H21, H23, J13, J22, J24

Suggested Citation

Casarico, Alessandra and Micheletto, Luca and Sommacal, Alessandro, Intergenerational Transmission of Skills During Childhood and Optimal Public Policy (February 1, 2011). ECONPUBBLICA Working Paper No. 154. Available at SSRN: https://ssrn.com/abstract=2014064 or http://dx.doi.org/10.2139/ssrn.2014064

Alessandra Casarico (Contact Author)

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

Via Roentgen 1
Milan, 20136
Italy

Luca Micheletto

Bocconi University ( email )

Via Sarfatti 25
20136 Milan, MI 20136
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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