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How Do Taxes Affect Human Capital? The Role of Intergenerational Mobility

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  • Lutz Hendricks

    (Department of Economics, Arizona State University)

Abstract

This paper investigates how explicitly modeling the intergenerational transmission of human capital modifies the effects of tax policies obtained from standard life-cycle models. The main finding is that the intergenerational persistence of human capital is not an important determinant of the steady state and transitional effects of several commonly studied tax policies. Conventional life-cycle models closely approximate the predictions generated by models with realistic intergenerational mobility properties. However, intergenerational persistence can substantially magnify the effects of policies that distort job-training investment. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.2001.0131
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 4 (2001)
Issue (Month): 3 (July)
Pages: 695-735

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Handle: RePEc:red:issued:v:4:y:2001:i:3:p:695-735

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Keywords: Taxation; intergenerational mobility; human capital;

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References

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  1. James J. Heckman, 2000. "Policies to Foster Human Capital," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 154, Northwestern University/University of Chicago Joint Center for Poverty Research.
  2. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(4), pages S11-44, August.
  3. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explorations with a Dynamic General Equilibrium Model of Labor Earnings with Heterogeneous Agents," NBER Working Papers 6384, National Bureau of Economic Research, Inc.
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  5. Charles T. Carlstrom & David Altig, 1999. "Marginal Tax Rates and Income Inequality in a Life-Cycle Model," American Economic Review, American Economic Association, American Economic Association, vol. 89(5), pages 1197-1215, December.
  6. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters, National Bureau of Economic Research, Inc, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
  7. James Davies & John Whalley, 1991. "Taxes and Capital Formation: How Important is Human Capital?," NBER Chapters, National Bureau of Economic Research, Inc, in: National Saving and Economic Performance, pages 163-200 National Bureau of Economic Research, Inc.
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  10. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, World Bank Group, vol. 10(3), pages 565-91, September.
  11. S. Smirnov & N. Isaev, 1999. "Social Policy," Problems of Economic Transition, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 42(6), pages 40-49, October.
  12. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
  13. Engen, Eric M. & Gravelle, Jane G. & Smetters, Kent, 1997. "Dynamic Tax Models: Why They Do the Things They Do," National Tax Journal, National Tax Association, vol. 50(3), pages 657-82, September.
  14. Behrman, Jere R & Taubman, Paul, 1989. "Is Schooling "Mostly in the Genes"? Nature-N urture Decomposition Using Data on Relatives," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(6), pages 1425-46, December.
  15. Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(2), pages 327-50, April.
  16. James J. Heckman & Lance Lochner & Christopher Taber, 1999. "General Equilibrium Cost Benefit Analysis of Education and Tax Policies," NBER Working Papers 6881, National Bureau of Economic Research, Inc.
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Cited by:
  1. Igor Kotlán & Zuzana Machová & Lenka Janíčková, 2011. "Taxation Influence on the Economic Growth," Politická ekonomie, University of Economics, Prague, University of Economics, Prague, vol. 2011(5), pages 638-658.
  2. Hendricks, Lutz A., 2007. "The Intergenerational Persistence of Lifetime Earnings," Staff General Research Papers, Iowa State University, Department of Economics 12669, Iowa State University, Department of Economics.
  3. Chih-Chin Ho & Ching-Yang Lin & Cheng-Tao Tang, 2013. "How Do Income and Bequest Taxes Affect Income Inequality? The Role of Parental Transfers," Working Papers, Research Institute, International University of Japan EMS_2013_10, Research Institute, International University of Japan.
  4. Lutz Hendricks, 2000. "Do Redistributive Policies Promote Intergenerational Mobility?," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 0607, Econometric Society.

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