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Education choice under uncertainty : implications for public policy
Hogan, Vincent (Vincent Peter); Walker, Ian
We analyse how progressive taxation and education subsidies affect schooling decisions when the returns to education are stochastic. We use the theory of real options to solve the problem of education choice in a dynamic stochastic model. We show that education attainment will be an increasing function of the risk associated with education. Furthermore, this result holds regardless of the degree of risk aversion. We also show that progressive taxes will tend to increase education attainment. Marie Curie Fellowship of the European Union programme “Improving Human Resource Potential and the Socio-Economic Knowledge Base” under contract HPMF-CT-2000-00879; Centre for the Economics of Education, Department of Education and Skills
Keyword(s): Education choice; Dynamic optimization; Optimal stopping; Uncertainty; J24; C61; D81; Education and state--Great Britain; Human capital; Education and state--Europe
Publication Date:
Type: Working paper
Peer-Reviewed: Unknown
Language(s): English
Institution: University College Dublin
Publisher(s): University College Dublin. School of Economics
File Format(s): other; application/pdf
Related Link(s):,
First Indexed: 2012-08-25 05:23:46 Last Updated: 2018-10-11 15:48:28