Optimal paternalistic health and human capital policies
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2018-02-16
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We study optimal human and health linear policies when there is a paternalistic motive to overcome present bias problems of agents with heterogeneous cognitive skills. The paternalistic intervention rewards individuals for physical capital accumulation and the combined e ect of health and human capital on future earnings. Our results highlight a novel e ect of paternalistic policies due to the interaction between present-biased preferences and cognitive skills. We illustrate numerically that this policy package is the most e ective and we analyze the relevance of agent's cognitive skills and present-biased preferences for the determination of rst-best and constrained rst-best optimal policies.