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Educational Investment, Fiscal Policy and Economic Development
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TitleEducational Investment, Fiscal Policy and Economic Development  
AuthorZhao Xiaojun, Weigang Liu and Hu Tao  
OrganizationSchool of Economics, Peking University;National Academy of Economic Strategy, CASS,; 
Key Wordsasymmetric information, ability evolution mechanism, educational investment, optimal taxation 
AbstractThis paper extends the work of Golosov et al (2003) and Stantcheva (2014). Taking the labor ability as the function of government investment in public education, private education investment and time, we study the optimal fiscal policy under New Dynamic Public Fiance. Firstly, we solve the optimal tax policy by Lagrange functional method extended by Zhao (2015) and prove that the Pareto allocation generated under social planner economy cannot be realized decentralized economy. Second, cooperating with optimal taxation we design education subsidies policy to implement the Pareto allocation. Finally, numerical simulation are carried out on distribution of private and public investment in education, fiscal policy evolution optimal conditions, convergence of distribution of labor ability,as well as distribution information mixing index and social welfare status. These research results enrich and expand the study on New Dynamic Public Fiance. 
Serial NumberWP1069 
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