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Money or joy: The choice of educational type

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  • Alstadsí¦ter, Annette
  • Kolm, Ann-Sofie
  • Larsen, Birthe

Abstract

This paper examines the effect of taxes on individuals' educational choices, and thus on the economy's skill composition. A proportional labour tax induces too many workers with high innate ability to choose education that is associated with high consumption and relatively low effort. This increases mismatching of skills and aggregate unemployment. The government could correct this distortion by use of subsidies or differentiated tuition fees. Furthermore, we consider the conditions under which each group of educated workers would support use of nonoptimal taxes and tuition fees.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 24 (2008)
Issue (Month): 1 (March)
Pages: 107-122

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Handle: RePEc:eee:poleco:v:24:y:2008:i:1:p:107-122

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Web page: http://www.elsevier.com/locate/inca/505544

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  1. Nielsen, Soren Bo & Sorensen, Peter Birch, 1997. "On the optimality of the Nordic system of dual income taxation," Journal of Public Economics, Elsevier, vol. 63(3), pages 311-329, February.
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  7. Edward P. Lazear, 1975. "Education: Consumption or Production," NBER Working Papers 0104, National Bureau of Economic Research, Inc.
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  9. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  10. Annette Alstadsæter, 2003. "Income Tax, Consumption Value of Education, and the Choice of Educational Type," CESifo Working Paper Series 1055, CESifo Group Munich.
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  12. Sarah E. Turner & William G. Bowen, 1999. "Choice of major: The changing (unchanging) gender gap," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(2), pages 289-313, January.
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  14. George A. Akerlof & Rachel E. Kranton, 2002. "Identity and Schooling: Some Lessons for the Economics of Education," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1167-1201, December.
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  16. Thomas N. Daymonti & Paul J. Andrisani, 1984. "Job Preferences, College Major, and the Gender Gap in Earnings," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 408-428.
  17. Quinn, Robert & Price, Jamie, 1998. "The demand for medical education: an augmented human capital approach," Economics of Education Review, Elsevier, vol. 17(3), pages 337-347, June.
  18. Parker, Simon C, 1996. "A Time Series Model of Self-Employment under Uncertainty," Economica, London School of Economics and Political Science, vol. 63(251), pages 459-75, August.
  19. R. Glenn Hubbard & William M. Gentry, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May.
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Cited by:
  1. Annette Alstadsæter, 2011. "Measuring the Consumption Value of Higher Education," CESifo Economic Studies, CESifo, vol. 57(3), pages 458-479, September.
  2. Bas Jacobs, 2013. "Optimal redistributive tax and education policies in general equilibrium," International Tax and Public Finance, Springer, vol. 20(2), pages 312-337, April.

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