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Teach a man to fish? Education vs. optimal taxation

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  • Eric Stephens

Abstract

In models of redistribution, differences in human capital are often the relevant source of heterogeneity among individuals. Presumably, the distribution of human capital can be manipulated through education spending. This paper examines the use of education as a redistributive tool when there is a non-linear tax system in place. The results show that taxation, whether under full or asymmetric information, substantially reduces the redistributive role of education spending in maximizing social welfare. This points to a conflict between the equalization of utility and human capital outcomes.

Suggested Citation

  • Eric Stephens, 2012. "Teach a man to fish? Education vs. optimal taxation," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1700-1727, November.
  • Handle: RePEc:cje:issued:v:45:y:2012:i:4:p:1700-1727
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    References listed on IDEAS

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    1. de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-133, February.
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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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