The effects of the tax system on education decisions and welfare
AbstractI study the effects of a linear tax schedule on educational decisions and welfare in a two period model where the educational decision is discrete and its return is uncertain. I find that a linear tax rate has a positive effect on the number of agents who decide to acquire higher education. This effect becomes negative when the revenue is returned as a lump-sum transfer. The government can influence the education level to some extent using a linear tax schedule. However this policy always has a negative welfare effect. I also find that if there is a revenue need a welfare maximizing government will prefer a linear tax to a lump-sum tax.
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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 2010-11.
Length: 30 pages
Date of creation: Mar 2010
Date of revision:
Publication status: Published by Ivie
Education; taxation; welfare.;
Find related papers by JEL classification:
- I20 - Health, Education, and Welfare - - Education - - - General
- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
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