| Abstract: | This study suggests that a subsidy in the form of public provision has the potential to be the most efficient educational policy because it stimulates investment in human capital, which would otherwise be inefficiently low because of distortionary income taxation and possible external benefits. Moreover, it can potentially do this without grossly distorting the mix of investments in human capital. Other policies do not have the potential to achieve both these ends without introducing additional, perhaps overwhelming, problems. Thus public provision of education appears to provide incentives for human capital accumulation which are more efficient than any other feasible policy. |
