At whose service? Subsidizing services and the skill premium
Abstract
In this paper we investigate the effects of subsidizing low-skilled, labour-intensive services hired by high-skilled individuals in the presence of labour income taxation. Whether such a subsidy can be Pareto-improving depends crucially on the degree of substitutability of both types of labour in the non-service sector. In case of some substitutability, a service subsidy can benefit all and decrease inequality, but in case of complementarity, low-skilled individuals benefit and high-skilled individuals are worse off.Download Info
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Paper provided by Utrecht School of Economics in its series Working Papers with number 09-30.Length: 17 pages
Date of creation: Nov 2009
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Handle: RePEc:use:tkiwps:0930
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Keywords: household production; services; skill premium; subsidy; wage tax;Other versions of this item:
- Groezen, B.J.A.M. van & Meijdam, A.C., 2010. "At Whose Service? Subsidizing Services and the Skill Premium," Discussion Paper 2010-01, Tilburg University, Center for Economic Research.
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-27 (All new papers)
- NEP-LAB-2009-11-27 (Labour Economics)
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