We develop a model of education where individuals face educational risk. Successfully entering the skilled labor sector depends on individual effort in education and public resources, but educational risk still causes (income) inequality. We show that an optimal public policy consists of...

Decisions about admission to selective schools usually rely on performance measures. To reach a required achievement threshold students may make use of additional resources, such as private tutoring. We investigate how the use of private tutoring relates to the transition probability to an...

Inequality of opportunity strikes when two children with the same academic performance are sent to different quality schools because their parents differ in socio-economic status. Based on a novel dataset for Germany, we demonstrate that children are significantly less likely to enter the...

We study whether early tracking of students based on ability increases migrant-native achievement gaps. To eliminate confounding impacts of unobserved country traits, we employ a differences-in-differences strategy that exploits international variation in the age of tracking as well as student...

This paper estimates the effects of family-background characteristics on student performance in the US and 17 Western European school systems. Family background has strong effects both in Europe and the United States, remarkably similar in size. France and Flemish Belgium achieve the most...

This paper develops a tractable, heterogeneous agents general equilibrium model where individuals have different endowments of the factors that complement the schooling process. The paper explores the relationship between inequality of opportunities, inequality of outcomes, and efficiency in...

Empirical evidence suggests that positive externalities from R&D exceed negative ones. According to conventional wisdom, this calls for R&D subsidies. This paper develops a quality-ladder growth model with overlapping generations which evaluates the positive and normative implications of R&D...

The total social benefits of college education exceed the private benefits because the government receives a share of the monetary returns in the form of income taxes. We study the policy implications of this fiscal externality in an optimal dynamic tax framework. Using a variational approach we...

In this paper, we quantitatively assess the welfare implications of alternative public education spending rules. To this end, we employ a dynamic stochastic general equilibrium model in which human capital externalities and public education expenditures, financed by distorting taxes, enhance the...

This paper uses an overlapping generations framework to analyze the implications of different financing regimes in the education sector for human capital formation and economic welfare. Agents privately invest in education after they have received a noisy information signal about their...