Progressive Taxation versus College Subsidies with College Dropout
构建了一个包含内生入学和辍学决策的异质性代理人宏观经济模型，分别求解最优累进劳动所得税和最优大学补贴，并比较社会福利，发现大学补贴比累进税更能提升社会福利。
Abstract This paper examines what the optimal policy is against the rising skill premium in a heterogeneous agent macroeconomic model in which agents make endogenous enrollment and dropout decisions. Some college enrollees in the model endogenously drop out after learning ability during college. Using this model, I derive the optimal progressive labor income tax and optimal college subsidies separately and compare the social welfare. While the effect of college subsidies is smaller than the case without learning ability, the optimal college subsidies improve social welfare more than the optimal progressive labor income tax.