Optimal Policy Towards Families with Different Amounts of Social Capital, in the Presence of Asymmetric Information and Stochastic Fertility

28 Pages Posted: 23 Mar 2006

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)

Date Written: February 2006

Abstract

We examine the effects of differences in social capital on first and second best transfers to families with children, in an asymmetric information context where the number of births, and the future earning capacity of each child that is born, are random variables. The probability that a couple has children is conditional on the level of reproductive activity undertaken. The probability that a child will have high earning ability is positively conditioned not only by the level of educational investment undertaken by the child's parents, but also by the social capital of the latter. The optimal policy includes two transfers, one conditional on number of births, the other on the children's earning ability.

Keywords: education, stochastic fertility, child benefits, pensions, scholarships, social capital, asymmetric information, multi-agency

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

Suggested Citation

Cigno, Alessandro and Luporini, Annalisa, Optimal Policy Towards Families with Different Amounts of Social Capital, in the Presence of Asymmetric Information and Stochastic Fertility (February 2006). CESifo Working Paper Series No. 1664, Available at SSRN: https://ssrn.com/abstract=892724 or http://dx.doi.org/10.2139/ssrn.892724

Alessandro Cigno (Contact Author)

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CESifo (Center for Economic Studies and Ifo Institute)

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IZA Institute of Labor Economics

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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