Prelims 2020 • Paper 2 (CSAT) • Q.23

Passage-3 People will invest in education whenever they are granted the economic freedom to fully enjoy its benefits. Again, this is for the obvious reason that the return on education increases as the level of economic freedom rises. When people, thanks to lower tax rates, are allowed to retain most of the higher income that they gain from each incremental level of education, it makes eminent sense to invest in education. On the other hand, when the government decides to tax the higher income of educated individuals at even higher rates, it makes very little sense to invest in educating oneself further. The same incentives apply to parents who decide on whether to invest in their children's education.