Redistributive Taxation, Incentives, and the Intertemporal Evolution of Human Capital
AbstractThis paper contributes to the literature on redistributive taxation and human capital dynamics by explicitly analyzing the role of incentives in the education market where human capital is produced. We introduce an explicit education market with heterogeneous private schools in a dynamic stochastic general equilibrium model with overlapping generations and human capital accumulation. We use the model to simulate the effects of taxation on growth, intergenerational mobility, inequality, and welfare. Equalization in education expenditures reduces incentives for differentiation in the education market, with the distribution of education investments shifting towards the least productive schools. This has significant consequences on equilibrium outcomes, and highlights the importance of incorporating the role of intermediation when analyzing redistribution policies.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 390.
Date of creation: 2010
Date of revision:
Human capital; school market; redistributive taxation; inequality; efficiency;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-05 (All new papers)
- NEP-CMP-2011-02-05 (Computational Economics)
- NEP-DGE-2011-02-05 (Dynamic General Equilibrium)
- NEP-EDU-2011-02-05 (Education)
- NEP-HRM-2011-02-05 (Human Capital & Human Resource Management)
- NEP-LAB-2011-02-05 (Labour Economics)
- NEP-PBE-2011-02-05 (Public Economics)
- NEP-PUB-2011-02-05 (Public Finance)
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