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Education and Taxation Policies in the Presence of Countervailing Incentives

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  • ALAN KRAUSE

Abstract

I examine income taxation and education policy when the government cannot observe individual productivity, and there exist conflicting incentives for individuals to understate and overstate their productivity. In this setting I identify four possible equilibria, and discuss the corresponding taxation/education policy mix. I show that no general restrictions on optimal taxation and education policy emerge in this environment, but each equilibrium and corresponding policy package can be associated with a country on the basis of its relative income and preference for redistribution.

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  • Alan Krause, 2009. "Education and Taxation Policies in the Presence of Countervailing Incentives," Economica, London School of Economics and Political Science, vol. 76(302), pages 387-399, April.
  • Handle: RePEc:bla:econom:v:76:y:2009:i:302:p:387-399
    DOI: 10.1111/j.1468-0335.2008.00695.x
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    References listed on IDEAS

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    Cited by:

    1. Blumkin, Tomer & Sadka, Efraim & Shem-Tov, Yotam, 2011. "Labor Migration and the Case for Flat Tax," Foerder Institute for Economic Research Working Papers 275759, Tel-Aviv University > Foerder Institute for Economic Research.
    2. Bierbrauer, Felix & Brett, Craig & Weymark, John A., 2013. "Strategic nonlinear income tax competition with perfect labor mobility," Games and Economic Behavior, Elsevier, vol. 82(C), pages 292-311.
    3. Tomer Blumkin & Efraim Sadka & Yotam Shem-Tov, 2015. "International tax competition: zero tax rate at the top re-established," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(5), pages 760-776, October.
    4. Tomer Blumkin & Efraim Sadka & Yotam Shem-Tov, 2011. "Labor Migration and the Case for Flat Tax," CESifo Working Paper Series 3471, CESifo.
    5. Laurent Simula, 2013. "Tax Competition and Migration," 2013 Meeting Papers 1126, Society for Economic Dynamics.
    6. Daniel Danau & Annalisa Vinella, 2017. "Contractual design in agency problems with non-monotonic cost and correlated information," SERIES 02-2017, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Mar 2017.
    7. Laurent Simula & Alain Trannoy, 2012. "Shall we keep the highly skilled at home? The optimal income tax perspective," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 39(4), pages 751-782, October.
    8. Blumkin, Tomer & Sadka, Efraim & Shem-Tov, Yotam, 2012. "Labor Migration and the Case for Flat Tax," Foerder Institute for Economic Research Working Papers 275771, Tel-Aviv University > Foerder Institute for Economic Research.
    9. Simula, Laurent & Trannoy, Alain, 2010. "Optimal income tax under the threat of migration by top-income earners," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 163-173, February.
    10. Alan Krause, 2017. "On redistributive taxation under the threat of high-skill emigration," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 48(4), pages 845-856, April.
    11. Massimo Morelli & Huanxing Yang & Lixin Ye, 2012. "Competitive Nonlinear Taxation and Constitutional Choice," American Economic Journal: Microeconomics, American Economic Association, vol. 4(1), pages 142-175, February.

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