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Tax Effects of Unemployment and the Choice of Educational Type

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Author Info
Alstadsæter, Annette () (Research Department, Statistics Norway,)
Kolm, Ann-Sofie () (Dept. of Economics, Stockholm University)
Larsen, Birthe () (CIM and Copenhagen Business School)

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Abstract

This paper examines the effect of taxes on the individuals’ choices of educational direction, and thus on the economy’s skill composition. A proportional labour income tax induces too many workers with high innate ability to choose an educational type with high consumption value and low effort costs. This increases the skill mismatch and aggregate unemployment in the economy. The government can correct for this distortion by use of differentiated tuition fees or tax rates.

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Publisher Info
Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2005:4.

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Length: 25 pages
Date of creation: 20 Apr 2005
Date of revision:
Handle: RePEc:hhs:sunrpe:2005_0004

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Related research
Keywords: Unemployment; matching; education; optimal taxation; tuition fees;

Other versions of this item:

Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy

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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.:
  1. 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. [Downloadable!] (restricted)
  2. Pissarides, Christopher A., 1998. "The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure," European Economic Review, Elsevier, vol. 42(1), pages 155-183, January. [Downloadable!] (restricted)
    Other versions:
  3. Bruce, Donald, 2000. "Effects of the United States tax system on transitions into self-employment," Labour Economics, Elsevier, vol. 7(5), pages 545-574, September. [Downloadable!] (restricted)
  4. Roger H. Gordon & Julie Berry Cullen, 2002. "Taxes and Entrepreneurial Activity: Theory and Evidence for the U.S," NBER Working Papers 9015, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Nielsen, Soren Bo & Sorensen, Peter Birch, 1997. "On the optimality of the Nordic system of dual income taxation," Journal of Public Economics, Elsevier, vol. 63(3), pages 311-329, February. [Downloadable!] (restricted)
  6. Pestieau, Pierre & Possen, Uri M., 1991. "Tax evasion and occupational choice," Journal of Public Economics, Elsevier, vol. 45(1), pages 107-125, June. [Downloadable!] (restricted)
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  7. Parker, Simon C, 1996. "A Time Series Model of Self-Employment under Uncertainty," Economica, London School of Economics and Political Science, vol. 63(251), pages 459-75, August. [Downloadable!] (restricted)
  8. Theodore W. Schultz, 1960. "Capital Formation by Education," Journal of Political Economy, University of Chicago Press, vol. 68, pages 571. [Downloadable!] (restricted)
  9. Michael J. Boskin, 1975. "Notes on the Tax Treatment of Human Capital," NBER Working Papers 0116, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. William M. Gentry & R. Glenn Hubbard, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May. [Downloadable!] (restricted)
  11. Driffill, E John & Rosen, Harvey S, 1983. "Taxation and Excess Burden: A Life Cycle Perspective," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 671-83, October. [Downloadable!] (restricted)
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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. von Greiff, Camilo, 2007. "Specialization in Higher Education and Economic Growth," Research Papers in Economics 2007:13, Stockholm University, Department of Economics. [Downloadable!]
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