Advanced Search
MyIDEAS: Login

Effects of differential taxation on factor accumulation and growth

Contents:

Author Info

  • Theo Eicher
  • Stephen Turnovsky
  • Maria Carme Riera i Prunera

    (Universitat de Barcelona)

Abstract

In this paper we try to analyze the role of fiscal policy in fostering a higher participation of the different production factors in the human capital production sector in the long-run. Introducing a tax on physical capital and differentiating both a tax on raw labor wage and a tax on skills or human capital we also attempt to present a way to influence inequality as measured by the skill premium, thus trying to relate the increase in human capital with the decrease in income inequality. We will do that in the context of a non-scale growth model. The model here is capable to alter the shares of private factors devoted to each of the two production sectors, final output and human capital, and affect inequality in a different way according to the different tax changes. The simulation results derived in the paper show how a human capital (skills) tax cut, which could be interpreted as a reduction in progressivity, ends up increasing both the shares of labor and physical capital devoted to the production of knowledge and decreasing inequality. Moreover, a raw labor wage tax decrease, which could also be interpreted as an increase in the progressivity of the system, increases the share of labor devoted to the production of final output and increases inequality. Finally, a physical capital tax decrease reduces the share of physical capital devoted to the production of knowledge and allows for a lower inequality value. Nevertheless, none of the various types of taxes ends up changing the share of human capital in the knowledge production, which will deserve our future attention.

Download Info

If 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.
File URL: http://www.ere.ub.es/dtreball/E0398.rdf/at_download/file
Download Restriction: no

Bibliographic Info

Paper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 98.

as in new window
Length: 48 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:bar:bedcje:200398

Contact details of provider:
Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.
Web page: http://www.ere.ub.es
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Lin, Shuanglin, 1998. "Labor income taxation and human capital accumulation," Journal of Public Economics, Elsevier, vol. 68(2), pages 291-302, May.
  2. 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.
  3. Bovenberg, A. Lans & van Ewijk, Casper, 1997. "Progressive taxes, equity, and human capital accumulation in an endogenous growth model with overlapping generations," Journal of Public Economics, Elsevier, vol. 64(2), pages 153-179, May.
  4. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S11-44, August.
  5. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  6. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  7. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-50, June.
  8. Steuerle, C Eugene, 1996. "How Should Government Allocate Subsidies for Human Capital?," American Economic Review, American Economic Association, vol. 86(2), pages 353-57, May.
  9. Kaplow, Louis, 1996. "On the Divergence between "Ideal" and Conventional Income-Tax Treatment of Human Capital," American Economic Review, American Economic Association, vol. 86(2), pages 347-52, May.
  10. Perroni, Carlo, 1995. "Assessing the Dynamic Efficiency Gains of Tax Reform When Human Capital Is Endogenous," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 907-25, November.
  11. Boskin, Michael J & Shoven, John B, 1980. "Issues in the Taxation of Capital Income in the United States," American Economic Review, American Economic Association, vol. 70(2), pages 164-70, May.
  12. Heckman, James J & Lochner, Lance & Taber, Christopher, 1998. "Tax Policy and Human-Capital Formation," American Economic Review, American Economic Association, vol. 88(2), pages 293-97, May.
  13. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  14. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  15. Boskin, Michael J, 1974. "The Effects of Government Expenditures and Taxes on Female Labor," American Economic Review, American Economic Association, vol. 64(2), pages 251-56, May.
  16. B. Douglas Bernheim & John B. Shoven, 1991. "National Saving and Economic Performance," NBER Books, National Bureau of Economic Research, Inc, number bern91-2.
  17. Lin, Hwan C. & Russo, Benjamin, 1999. "A Taxation Policy Toward Capital, Technology and Long-Run Growth," Journal of Macroeconomics, Elsevier, vol. 21(3), pages 463-491, July.
  18. Michael J. Boskin, 1975. "Notes on the Tax Treatment of Human Capital," NBER Working Papers 0116, National Bureau of Economic Research, Inc.
  19. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
  20. Kathryn Gordon & Harry Tchilinguirian, 1998. "Marginal Effective Tax Rates on Physical, Human and R&D Capital," OECD Economics Department Working Papers 199, OECD Publishing.
  21. James Davies & John Whalley, 1991. "Taxes and Capital Formation: How Important is Human Capital?," NBER Chapters, in: National Saving and Economic Performance, pages 163-200 National Bureau of Economic Research, Inc.
  22. Felder, Stefan, 1997. "Tax Reform in a Two-Class Growth Model," Empirical Economics, Springer, vol. 22(2), pages 273-91.
  23. Carlo Perroni, 1997. "Joint Production of Goods and Knowledge: Implications for Tax Reform," International Tax and Public Finance, Springer, vol. 4(2), pages 149-165, May.
  24. Eicher, Theo S & Turnovsky, Stephen J, 1999. " Convergence in a Two-Sector Nonscale Growth Model," Journal of Economic Growth, Springer, vol. 4(4), pages 413-28, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Altar, Moisa & Necula, Ciprian & Bobeica, Gabriel, 2008. "Modeling The Economic Growth In Romania. The Role Of Human Capital," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(3), pages 115-128, September.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bar:bedcje:200398. See general 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: (Espai de Recerca en Economia).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.