Taxing Human Capital Efficiently when Qualified Labour is Mobile
AbstractThe paper studies the effect that skilled labour mobility has on efficient education policy. The model is one of two periods in which a representative taxpayer decides on labour, education, and saving. The government can only use linear tax and subsidy instruments. It is shown that the mobility of skilled labour well constrains government’s choice of policy instruments. The mobility does not however affect second best education policy in allocational terms. In particular, education should be effectively subsidized if, and only if, the elasticity of the earnings function is increasing in education. This rule applies regardless of whether labour is mobile or immobile.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3366.
Date of creation: 2011
Date of revision:
mobile labour; second-best efficient taxation; linear instruments; residence vs. source principle;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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