On the positive effects of taxation on education
AbstractIn the economic literature a constant tax rate on labor income has usually a neutral or negative effect on education. The effect is neutral in the absence of non-deductible costs and it is negative in the presence of them. A positive effect is obtained in the presence of non-deductible profits or uncertainty in the returns to education. In this model education is treated as a signalling device for the level of human capital and agents choose freely their labor supply under certainty and perfect financial markets. Within this framework a constant tax rate on labor income has a positive effect on education under certainty and in the absence of non-deductible costs or profits as long as consumption and leisure are complementary and the amount of transfers and family income is low enough.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2007-30.
Length: 32 pages
Date of creation: Dec 2007
Date of revision:
Publication status: Published by Ivie
Find related papers by JEL classification:
- I20 - Health, Education, and Welfare - - Education - - - General
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-26 (All new papers)
- NEP-EDU-2008-01-26 (Education)
- NEP-PUB-2008-01-26 (Public Finance)
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.:
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