A Theory of Educational Inequality Family and Agency Costs

Jellal, Mohamed (2009): A Theory of Educational Inequality Family and Agency Costs.

Abstract

In this paper, we examine the consequences of imperfect information on the pattern of transfers from parents to children. Drawing on the theory of mechanism design, we consider a model of family contract with two levels of effort. We prove that equal transfers among children are expected under perfect information, while the second-best contract implies risksharing between the two generations, so that poor families experience higher agency costs..

• Item Type: MPRA Paper
• Language: English
• Keywords: Education; Asymmetric Information; Family Financial Incentives; Inequality
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; J - Labor and Demographic Economics > J1 - Demographic Economics; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics; D - Microeconomics > D1 - Household Behavior and Family Economics

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