Universität zu Köln

Funk, Peter ORCID: 0000-0002-1455-4552 (2019). Human Capital, Polarisation and Pareto-improving Activating Welfare. The economic journal, 129 (619). 1221 - 1247. OXFORD UNIV PRESS. ISSN 1468-0297

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Abstract

Human capital not only earns income but also is a source of direct felicity. The interaction between these two motives for effort can generate multiple stationary solutions for individual household optimisation. This multiplicity freezes any sufficiently unequal initial skill distribution and persistently segregates households into two separate groups: one rich and educated, one poor and uneducated. If public goods are to be financed, polarisation is typically Pareto-inefficient. While unconditional transfers only reduce the incentive to accumulate skills, activating tax-transfer systems that Pareto-dominate any non-redistributing system exist. Transfers are transitory and a negative marginal income tax is imposed on poor households' income.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Funk, Peter UNSPECIFIED orcid.org/0000-0002-1455-4552 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-151616
DOI:	10.1111/ecoj.12575
Journal or Publication Title:	The economic journal
Volume:	129
Number:	619
Page Range:	1221 - 1247
Date:	2019
Publisher:	OXFORD UNIV PRESS
ISSN:	1468-0297
Language:	English
Faculty:	Central Institutions / Interdisciplinary Research Centers
Divisions:	Weitere Institute, Arbeits- und Forschungsgruppen > Center for Macroeconomic Research (CMR)
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language INCOME; SUBSTITUTION Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/15161