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Tax Policy and Returns to Education

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  • Alison L. Booth
  • Melvyn B. Coles

Abstract

This paper considers how asymmetric tax treatment, where labour market earnings are taxed but household production is untaxed, aspects 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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Bibliographic Info

Paper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 591.

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Date of creation: Dec 2008
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Handle: RePEc:auu:dpaper:591

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Keywords: Increasing returns; tax policy; gender; labour supply; education;

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References

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  1. Booth, Alison L. & Coles, Melvyn, 2005. "Education, Matching and the Allocative Value of Romance," IZA Discussion Papers 1649, Institute for the Study of Labor (IZA).
  2. Apps, P.F. & Rees, R., 1993. "Labour Supply, Household Production and Intra-Family Welfare Distribution," The Warwick Economics Research Paper Series (TWERPS) 405, University of Warwick, Department of Economics.
  3. Alesina, Alberto & Ichino, Andrea & Karabarbounis, Loukas, 2007. "Gender Based Taxation and the Division of Family Chores," IZA Discussion Papers 3233, Institute for the Study of Labor (IZA).
  4. Alison Booth & Melvyn Coles, 2007. "A Microfoundation For Increasing Returns In Human Capital Accumulation And The Under-Participation Trap," CAMA Working Papers 2007-07, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  5. 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.
  6. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  7. Bovenberg, A.L. & Jacobs, B., 2001. "Redistribution and Education Subsidies are Siamese Twins," Discussion Paper 2001-82, Tilburg University, Center for Economic Research.
  8. Bas Jacobs, 2005. "Optimal Income Taxation with Endogenous Human Capital," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 295-315, 05.
  9. Trostel, P. & Walker, I., 2000. "Education and Work," The Warwick Economics Research Paper Series (TWERPS) 554, University of Warwick, Department of Economics.
  10. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
  11. repec:dgr:uvatin:2005036 is not listed on IDEAS
  12. Rios-Rull, Jose-Victor, 1993. "Working in the Market, Working at Home, and the Acquisition of Skills: A General-Equilibrium Approach," American Economic Review, American Economic Association, vol. 83(4), pages 893-907, September.
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Cited by:
  1. Booth, A.L. & Ours, J.C. van, 2010. "Part-time Jobs: What Women Want?," Discussion Paper 2010-05, Tilburg University, Center for Economic Research.
  2. CREMER, Helmuth & PESTIEAU, Pierre & RACIONERO, Mario, . "Unequal wages for equal utilities," CORE Discussion Papers RP -2369, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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