Endogenous human capital accumulation, comparative advantage and direct vs. indirect redistribution
AbstractRecently, several papers have re-examined the so-called production efficiency theorem and the Atkinson and Stiglitz theorem on commodity taxes in the optimal taxation literature. Naito (1999) showed that indirect redistribution through production distortion or consumption distortion can Pareto-improve welfare and that the two theorems do not necessarily hold when different factors are imperfect substitutes and factor prices are endogenous. On the other hand, Saez (2001) argued that in the long run where human capital accumulation is endogenous, the two theorems are still valid. This paper develops reasonable alternative models where individuals accumulate human capital based on their comparative advantage. The present paper shows that the production efficiency theorem is not necessarily valid and that indirect redistribution from the able to the less able such as tariffs and production subsidies can increase efficiency even when skill accumulation is endogenous.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 88 (2004)
Issue (Month): 12 (December)
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Web page: http://www.elsevier.com/locate/inca/505578
Other versions of this item:
- Hisahiro Naito, 2003. "Endogenous Human Capital Accumulation, Comparative Advantage and Direct vs. Indirect Redistribution," ISER Discussion Paper 0590, Institute of Social and Economic Research, Osaka University.
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