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Redistribution and education subsidies are siamese twins

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Author Info
Bovenberg, A.L.
Jacobs, B. (Tilburg University, Center for Economic Research)

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Abstract

We develop a model of human capital formation with endogenous labor supply and heterogeneous agents to explore the optimal level of education subsidies along with the optimal progressive schedule of the labor income tax and optimal capital income taxes. Subsidies on education ensure efficiency in human capital accumulation, while taxes on skilled labor help to redistribute income towards the less able. We thus provide a rationale for the widely observed presence of education subsidies. The actually observed tax codes and level of education subsidies suggest that a large part of education subsidies can be justified on these grounds.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 82.

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Date of creation: 2001
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Handle: RePEc:dgr:kubcen:200182

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Find related papers by JEL classification:
H2 - Public Economics - - Taxation, Subsidies, and Revenue
H5 - Public Economics - - National Government Expenditures and Related Policies
I2 - Health, Education, and Welfare - - Education
J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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Full references

Cited by:
(explanations, 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.)

  1. Wolfram Richter, 2004. "Efficiency Effects of Tax Deductions for Work-Related Expenses," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  2. Salvatore Barbaro, 2004. "Tax Distortion, Countervailing Subsidies and Income Redistribution," Departmental Discussion Papers 121, University of Goettingen, Department of Economics. [Downloadable!]
  3. Larsen, Birthe, 2004. "Skill level, Cognitive Ability, Unemployment and Welfare," Working Papers 17-2004, Copenhagen Business School, Department of Economics. [Downloadable!]
  4. Bovenberg, A Lans & Jacobs, Bas, 2005. "Human Capital and Optimal Positive Taxation of Capital Income," CEPR Discussion Papers 5047, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Robert A.J. Dur & Coen N. Teulings, 2001. "Education and Efficient Redistribution," Tinbergen Institute Discussion Papers 01-090/3, Tinbergen Institute, revised 12 Jun 2003. [Downloadable!]
    Other versions:
  6. Bovenberg, A.L., 2003. "Tax policy and labor market performance," Discussion Paper 90, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  7. Kirk A. Collins & James Davies, 2003. "Measuring Effective Tax Rates on Human Capital: Methodology and an Application to Canada," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  8. Robert A. J. Dur & Amihai Glazer, 2005. "Subsidizing Enjoyable Education," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  9. James J. Heckman & Dimitriy V. Masterov, 2005. "Allander Series: Skill Policies for Scotland," NBER Working Papers 11032, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Wolfram F. Richter, 2006. "Taxing Human Capital Efficiently: The Double Dividend of Taxing Non-Qualified Labour More Heavily Than Qualified Labour," IZA Discussion Papers 2328, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Mohamed Ben Mimoun, 2004. "Redistribution Through Education and Other Mechanisms Under. Capital-Market Imperfections and Uncertainty : A Welfare Effect Analysis," Cahiers de la Maison des Sciences Economiques bla04110, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
    Other versions:
  12. Geir Haakon Bjertnæs, 2006. "Income Taxation, Tuition Subsidies, and Choice of Occupation," Discussion Papers 459, Research Department of Statistics Norway. [Downloadable!]
  13. Bas Jacobs, . "An investigation of education finance reform: Graduate taxes and income contingent loans in the Netherlands," CPB Discussion Papers 9, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  14. Heckman, James J. & Masterov, Dimitriy V., 2004. "Skill Policies for Scotland," IZA Discussion Papers 1444, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  15. Richter, Wolfram F., 2008. "Efficient Tax Policy Ranks Education Higher Than Saving," IZA Discussion Papers 3451, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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