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Tax policy and returns to education

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Author Info

  • Booth, A.L.
  • Coles, M.G.

Abstract

This paper considers how asymmetric tax treatment, where labour market earnings are taxed but household production is untaxed, affects educational choice and labour supply. We show that taxes on labour market earnings can generate a large (non-marginal) switch to home production and the ensuing deadweight losses are large. Using a cross-country panel, we find that gender differences in labour supply responses to tax policy can explain differences in aggregate labour supply and years of education across countries.

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File URL: http://www.sciencedirect.com/science/article/B6VFD-4W15KPW-1/2/7b3ff47fa4f38c735bb5ae391b110a1f
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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 1 (January)
Pages: 291-301

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Handle: RePEc:eee:labeco:v:17:y:2010:i:1:p:291-301

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Web page: http://www.elsevier.com/locate/labeco

Related research

Keywords: Increasing returns Tax policy Gender Labour supply Education;

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References

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  1. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  2. Lans Bovenberg, A. & Jacobs, Bas, 2005. "Redistribution and education subsidies are Siamese twins," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2005-2035, December.
  3. Apps, P.F. & Rees, R., 1993. "Labor Supply, Household Production and Intra-Family Welfare Distribution," Papers 248, Australian National University - Department of Economics.
  4. Alison L. Booth & Melvyn Coles, 2006. "A Microfoundation for Increasing Returns in Human Capital Accumulation and the Under-Participation Trap," CEPR Discussion Papers 543, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  5. repec:dgr:uvatin:2005036 is not listed on IDEAS
  6. Bas Jacobs, 2002. "Optimal Income Taxation with Endogenous Human Capital," Tinbergen Institute Discussion Papers 02-045/2, Tinbergen Institute.
  7. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
  8. Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-50, April.
  9. Trostel, P. & Walker, I., 2000. "Education and Work," The Warwick Economics Research Paper Series (TWERPS) 554, University of Warwick, Department of Economics.
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Citations

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Cited by:
  1. Alison Booth & Jan Ours, 2013. "Part-time jobs: what women want?," Journal of Population Economics, Springer, vol. 26(1), pages 263-283, January.
  2. Helmuth Cremer & Pierre Pestieau & Maria Racionero, 2011. "Unequal wages for equal utilities," International Tax and Public Finance, Springer, vol. 18(4), pages 383-398, August.

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