Intergenerational Transmission of Skills during Childhood and Optimal Public Policy
CESifo, Munich, 2011
CESifo Working Paper No. 3343
![](https://cesifo.org/DocImg/cesifo1_wp3343.jpg?c=1689237014)
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.
Public Finance