This paper studies second best policies for education, saving, and labour in an OLG model in which endogenous growth results from human capital accumulation. Government expenditures have to be financed by linear instruments so that growth equilibria are inefficient. The inefficiency is...

Assuming a two-period model with endogenous choices of labour, education, and saving, it is shown to be second-best efficient to deviate from Ramsey's Rule and to distort qualified labour less than nonqualified labour. The result holds for arbitrary utility and learning functions. Efficient...

Assuming a two-period model with endogenous choices of labour, education, and saving, it is shown to be second-best efficient to deviate from Ramsey's Rule and to distort qualified labour less than nonqualified labour. Furthermore, if the earnings function displays constant elasticity, the...

Assuming decreasing returns to education and the endogenous supply of qualified and non-qualified labour it is shown to be efficient to supplement a consumption tax with positive incentives for education. If the return from education is isoelastic and if the choice is between (i) subsidizing the...

Assuming a two-period model with endogenous choices of labour, education, and saving, efficient education policy is characterized for a Ramsey-like scenario in which the government is constrained to use linear instruments. It is shown that education should be effectively subsidized if, and only...