%0 Report
        %A Koeniger, Winfried
%A Prat, Julien
        %T Human Capital and Optimal Redistribution
        %D 2014
        %8 2014 Nov
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 8666
        %U https://www.iza.org/index.php/publications/dp8666
        %X We characterize optimal redistribution in a dynastic family model with human capital. We show how a government can improve the trade-off between equality and incentives by changing the amount of observable human capital. We provide an intuitive decomposition for the wedge between human-capital investment in the laissez faire and the social optimum. This wedge differs from the wedge for bequests because human capital carries risk: its returns depend on the non-diversifiable risk of children's ability. Thus, human capital investment is encouraged more than bequests in the social optimum if human capital is a bad hedge for consumption risk.
        %K optimal taxation
%K human capital