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Author: | Stark, O. Wang, Y. |
Title: | Inducing human capital formation: migration as a substitute for subsidies |
Journal: | Journal of Public Economics
2002 : OCT, VOL. 86:1, p. 29-46 |
Index terms: | Migration Human capital Social welfare Externalities Policy Models |
Language: | eng |
Abstract: | When productivity is fostered by an individual's own human capital as well as by the economy-wide average level of human capital, individuals under-invest in human capital. The provision of subsidies for the formation of human capital, conditional on the subsidy being self-financed by tax revenues, can bring the economy to its socially optimal level of human capital. Yet a strictly positive probability of migration to a richer country, by raising both the level of human capital formed by optimizing individuals in the home country and the average level of human capital of non-migrants in the country, can enhance welfare and nudge the economy toward the social optimum. Indeed, under a well-controlled, restrictive migration policy the welfare of all workers is higher than in the absence of this policy. |
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