Income Taxation, Tuition Subsidies, and Choice of Occupation

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Income Taxation, Tuition Subsidies, and Choice of Occupation

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Geir Haakon Bjertnæs () (Statistics Norway)

Abstract

Differentiated tax rates on labor and capital income are found to be optimal in this study, where agents choose occupation based on lifetime income net of tuition costs. Efficient revenue raising in a case where the government can not observe educational effort implies that the government should trade off efficiency in production for efficiency in intertemporal consumption. The subsequent wage difference between high and low-skilled occupations is increased compared to a production efficient outcome, which is in contrast to previous results in the literature.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 459.

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Date of creation: May 2006
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Handle: RePEc:ssb:dispap:459

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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

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-05-20 (All new papers)
NEP-PBE-2006-05-20 (Public Economics)
NEP-PUB-2006-05-20 (Public Finance)

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