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Optimal taxation in the Uzawa-Lucas Model with externality in human capital

Author

Listed:
  • Arantza Gorostiaga

    (Dpto. Fundamentos del Análisis Económico II)

  • Jana Hromcová

    (Universitat de Girona)

  • Miguel Ángel López García

    (Dpt. Economia Aplicada)

Abstract

We show that in the Uzawa-Lucas model with externality in human capital with agents that value both consumption and leisure, the government pursuing the first best can achieve its goal by subsidizing the foregone earnings while studying. The subsidy should be financed by a schooling fee. We obtain that countries with similar initial conditions may issue different fees because multiple equilibria can arise for empirically plausible values of parameters. This result differs from the one obtained in ananalogous economy where agents only value consumption.

Suggested Citation

  • Arantza Gorostiaga & Jana Hromcová & Miguel Ángel López García, 2011. "Optimal taxation in the Uzawa-Lucas Model with externality in human capital," Working Papers. Serie AD 2011-19, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2011-19
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    References listed on IDEAS

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    Cited by:

    1. Neustroev, Dmitry, 2013. "The Uzawa-Lucas Growth Model with Natural Resources," MPRA Paper 52937, University Library of Munich, Germany.
    2. Bosi, Stefano & Camacho, Carmen & Ha-Huy, Thai, 2023. "Balanced growth and degrowth with human capital," Economics Letters, Elsevier, vol. 232(C).
    3. Stefano Bosi & Carmen Camacho & Thai Ha-Huy, 2023. "On the uniqueness of the optimal path in a discrete-time model à la Lucas (1988)," PSE Working Papers halshs-03920386, HAL.
    4. Takumi Motoyama, 2019. "Sustainability of public debt under physical and human capital accumulation in an overlapping generations model," Journal of Economics, Springer, vol. 127(1), pages 19-45, June.
    5. Shiro Kuwahara, 2017. "Multiple steady states and indeterminacy in the Uzawa–Lucas model with educational externalities," Journal of Economics, Springer, vol. 122(2), pages 173-190, October.
    6. Barañano Mentxaka, Ilaski & San Martín Lizarralde, Marta, 2015. "Optimal Taxation and Indeterminacy in the Uzawa-Lucas Model with Sector-specific Externalities," IKERLANAK 16781, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.

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    More about this item

    Keywords

    optimal policy; two-sector model; endogenous growth; indeterminacy.;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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