Education Vouchers and Labour Supply

Abstract

This paper compares labour supply behaviour under a uniform education voucher system with one involving a means-tested scheme in which the voucher is subject to a taper or withdrawal rate as parental gross income increases. Particular attention is given to the implications of nonlinear budget constraints. Parents maximise a utility function which includes their consumption, leisure and the human capital of children. The human capital production function has inputs consisting of parental human capital and expenditure on education.