Deficiency in Investment in Early Education: The Second-Best Optimal Levels of Investment in Later Education and Human Capital

  •  Phung Xuan Nha    
  •  Pham Xuan Hoan    


This paper extends the work of Cunha et al. (2005) by replacing an exogenously-determined target level of human capital with the optimization of a net benefit function, to address the issue of the optimal levels of education and human capital when there is an investment-deficiency in early ages. The study shows that it is not socially optimal to completely offset an investment-deficiency in early ages. Indeed, in the case of direct complementarity, an early investment-deficiency should be optimally followed by an even greater investment-deficiency the later stage. The paper rings a bell on the ambitious plan on tertiary education development in Vietnam. (Classification: J3, E2, I00.)

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