Evaluating the effect of tax deductions on training
AbstractDue to a tax law implemented in 1998, Dutch employers can claim an extra tax deduction when they train employees aged 40 years or older. This causes a discontinuity in a firm's cost of training an employee. We exploit this discontinuity to identify two effects: the effect of the tax deduction on training participation, and the effect of training participation on wages. We find that the training rate of workers just above 40 is about 15-20 percent higher than the training rate of workers just below 40. This difference cannot entirely be attributed to the stimulating effect of the tax deduction. Our estimates show that spill- over effects on workers younger than 40 are so substantial that the net effect of the age-dependent tax deduction is zero.
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Bibliographic InfoPaper provided by EconWPA in its series Labor and Demography with number 0205001.
Length: 26 pages
Date of creation: 08 May 2002
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Other versions of this item:
- Edwin Leuven & Hessel Oosterbeek, 2004. "Evaluating the Effect of Tax Deductions on Training," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 461-488, April.
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-06-13 (All new papers)
- NEP-PBE-2002-06-13 (Public Economics)
- NEP-PUB-2002-06-13 (Public Finance)
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