Dan Anderberg

Investments in human capital, wage uncertainty, and public policy

Abstract The importance of risk characteristics of human capital for the design of tax and education policy is explored. Wages are uncertain and education, while increasing the expected wage, may increase or decrease wage variance. The government has strong reasons to encourage human capital formation in the latter case, partly due to the insurance effect of human capital, and partly due to the way the individuals—under a plausible restriction on ‘prudence’—respond to changes in risk. The analysis is illustrated using two models of education: one where education helps the individuals make better occupational choices, and a standard risk-augmented Becker-type model.

Social Insurance with Risk‐Reducing Investments

A two-sector model with sector-dependent disability risks is presented. Working in the low-risk sector requires skills that can be obtained by investments in education. Moral hazard precludes full insurance. The labour force allocation is responsive to the incentives created by a social insurance system. The rationale for intervention lies in the governments power to cross-subsidize between the sectors, and it is demonstrated how the responsiveness of the labour force allocation limits cross-subsidization. The second-best policy is time-inconsistent. The consistent equilibrium is explored and is argued to provide weak incentives to reduce risks.

Time, Self-Selection and User Charges for Public Goods

Many public goods generate utility only when combined with a time-input. Important examples include road networks and publicly provided leisure facilities. If it is possible to charge for the time spent using the public good it is generally a second-best Pareto optimal policy to do so even in the absence of congestion. An optimal linear user charge is analyzed within a standard optimum income-tax framework. Second-best public good provision in the presence of a user charge is also characterized and factors that influence the direction of optimal distortion of the public good supply are identified.

A Dynamic Model of the Black Economy

A dynamic equilibrium model of an economy with underground trade is developed in which agents devote effort to search, building up networks of underground contacts. The model is used to illustrate dynamic responses to tax increases. The model is shown to be consistent with the stylized fact that the underground economies have continued to grow in many countries after taxes have stopped increasing. The model is also used to explore how optimal policy depends on the dynamic properties of underground networks.

Time-Consistent Policy and Politics: Does Voting Matter When Individuals Are Identical?

Abstract We consider the implications of a lack of policy commitment when policies are chosen through a political process and individuals are ex-ante identical. We show that politics, by allowing ex-post distributional tensions to shape policy, can make it possible to sustain non-trivial equilibria in which the commitment problem is alleviated or fully eliminated. How effective politics can be at countering collective commitment problems in homogeneous groups depends on the nature of the political process and on the extent to which private choices are public information.

Soft commitment: a study on demand and compliance

ABSTRACT This article explores the demand for soft, self-imposed commitment, and subsequent compliance behaviour, using a framed field study in a higher education setting. We find a substantial soft commitment demand and a remarkably high failure to comply with the chosen commitment. Students are more likely to demand soft commitment if they expect the task to be more time-consuming and their relative performance to be lower. Failure to comply is associated with previous grade and personality traits. We find no evidence that soft commitment affects grades.

Investment in education under disappointment aversion

This paper develops a model of risky investment in education under disappointment aversion, modelled as loss aversion around ones endogenous expectation. The model shows that disappointment aversion reduces investments in education for lower ability people and increases investments for higher ability people, thereby magnifying the gap between them generated by the riskiness of education.