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A Case for Taxing Education

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  • Tomer Blumkin
  • Efraim Sadka

Abstract

We illustrate a novel informational feature of education, which the government may utilize. Discretionary decisions of individuals to acquire education may serve as an additional signal (to earned labor income) on the underlying unobserved innate earning ability, thereby mitigating the informational constraint faced by the government. We establish a case for taxing education, as a supplement to the labor income tax.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-04/cesifo1_wp1440.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1440.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1440

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Keywords: optimal taxation; re-distribution; education; inequality;

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References

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  1. Saint-Paul, Gilles, 1994. "Unemployment, wage rigidity, and the returns to education," European Economic Review, Elsevier, vol. 38(3-4), pages 535-543, April.
  2. Saez, Emmanuel, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 205-29, January.
  3. BARHAM, Vicky & BOADWAY, Robin & MARCHAND, Maurice & PESTIEAU, Pierre, 1992. "Education and the poverty trap," CORE Discussion Papers 1992010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Brett, Craig & Weymark, John A., 2003. "Financing education using optimal redistributive taxation," Journal of Public Economics, Elsevier, vol. 87(11), pages 2549-2569, October.
  5. Carneiro, Pedro & Heckman, James J., 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," IZA Discussion Papers 518, Institute for the Study of Labor (IZA).
  6. James J. Heckman, 1999. "Policies to Foster Human Capital," NBER Working Papers 7288, National Bureau of Economic Research, Inc.
  7. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  8. Boadway, Robin & Marceau, Nicolas & Marchand, Maurice, 1996. "Investment in Education and the Time Inconsistency of Redistributive Tax Policy," Economica, London School of Economics and Political Science, vol. 63(250), pages 171-89, May.
  9. Eckstein, Zvi & Zilcha, Itzhak, 1994. "The effects of compulsory schooling on growth, income distribution and welfare," Journal of Public Economics, Elsevier, vol. 54(3), pages 339-359, July.
  10. Boadway, Robin & Marchand, Maurice, 1995. "The Use of Public Expenditures for Redistributive Purposes," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 45-59, January.
  11. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  12. Razin,Assaf & Sadka,Efraim, 2001. "Labor, Capital, and Finance," Cambridge Books, Cambridge University Press, number 9780521785570, October.
  13. Ulph, David, 1977. "On the optimal distribution of income and educational expenditure," Journal of Public Economics, Elsevier, vol. 8(3), pages 341-356, December.
  14. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
  15. Mark Gradstein, 1999. "An Economic Rationale for Public Education: The Value of Commitment," CESifo Working Paper Series 209, CESifo Group Munich.
  16. Deaton, Angus, 1981. "Optimal Taxes and the Structure of Preferences," Econometrica, Econometric Society, vol. 49(5), pages 1245-60, September.
  17. Tuomala, Matti, 1986. "On the optimal income taxation and educational decisions," Journal of Public Economics, Elsevier, vol. 30(2), pages 183-198, July.
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Cited by:
  1. Tomer Blumkin & Efraim Sadka, 2008. "A case for taxing education," International Tax and Public Finance, Springer, vol. 15(2), pages 145-163, April.
  2. Martin Gonzalez-Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," 2004 Meeting Papers 199, Society for Economic Dynamics.

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