Taxes and Capital Formation: How Important is Human Capital?
In: National Saving and Economic Performance
AbstractThis paper explores how explicit incorporation of human capital affects dynamic general equilibrium analysis of the effects of taxes on capital formation and welfare in a life-cycle growth model. In contrast to the results of partial equilibrium analysis, we find that estimates of the full dynamic welfare costs of capital income taxes are little affected by incorporating human capital. While the short-run impact effects of replacing income taxes with wage or consumption taxes are significantly affected by endogenizing human capital, these effects are short-lived. In the long-run the rate of return on non-human capital falls to approximately its initial net of tax level, and steady-state human capital investment plans are therefore little affected by the tax changes. Although incorporating human capital thus does not greatly alter results in our numerical simulations, a wide range of extensions and modifications of the model are discussed which could in principle modify this conclusion.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
This chapter was published in:
This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 5991.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- James Davies & John Whalley, 1989. "Taxes and Capital Formation: How Important is Human Capital?," NBER Working Papers 2899, National Bureau of Economic Research, Inc.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.