IDEAS home Printed from https://ideas.repec.org/p/hhs/ifauwp/2024_008.html
   My bibliography  Save this paper

Optimal redistribution and education signaling

Author

Listed:
  • Bastani, Spencer

    (IFAU - Institute for Evaluation of Labour Market and Education Policy)

  • Blumkin, Tomer

    (Department of Economics, Ben Gurion University of the Negev)

  • Micheletto, Luca

    (Department of Law, University of Milan, and Dondena Centre for Research on Social Dynamics and Public Policy, Bocconi University)

Abstract

This paper studies optimal taxation of income and education when employers cannot observe workers’ productivity and workers signal their productivity to firms by choosing both quantity and quality of education. We characterize constrained efficient allocations and derive conditions under which there is predistribution, i.e., redistribution through wage compression. Implementation through income and education dependent taxes is discussed, as well as education mandates. A key insight is that achieving predistribution requires complementing the income tax with additional policy instruments that regulate the flow of information in the labor market and prevent high skilled individuals from separating themselves from their low-skilled counterparts.

Suggested Citation

  • Bastani, Spencer & Blumkin, Tomer & Micheletto, Luca, 2024. "Optimal redistribution and education signaling," Working Paper Series 2024:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    • Handle: RePEc:hhs:ifauwp:2024_008
    as

    Download full text from publisher

    File URL: https://www.ifau.se/globalassets/pdf/se/2024/wp-2024-8-optimal-redisturbution-and-education-signaling.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    nonlinear taxation; education; asymmetric information; human capital; predistribution;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:ifauwp:2024_008. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ali Ghooloo (email available below). General contact details of provider: https://edirc.repec.org/data/ifagvse.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.