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Tax policy and returns to education

  • Booth, A.L.
  • Coles, M.G.

This paper considers how asymmetric tax treatment, where labour market earnings are taxed but household production is untaxed, affects educational choice and labour supply. We show that taxes on labour market earnings can generate a large (non-marginal) switch to home production and the ensuing deadweight losses are large. Using a cross-country panel, we find that gender differences in labour supply responses to tax policy can explain differences in aggregate labour supply and years of education across countries.

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File URL: http://www.sciencedirect.com/science/article/B6VFD-4W15KPW-1/2/7b3ff47fa4f38c735bb5ae391b110a1f
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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 1 (January)
Pages: 291-301

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Handle: RePEc:eee:labeco:v:17:y:2010:i:1:p:291-301
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Apps, P. F. & Rees, R., 1996. "Labour supply, household production and intra-family welfare distribution," Journal of Public Economics, Elsevier, vol. 60(2), pages 199-219, May.
  2. Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-50, April.
  3. Bovenberg, A Lans & Jacobs, Bas, 2001. "Redistribution and Education Subsidies are Siamese Twins," CEPR Discussion Papers 3099, C.E.P.R. Discussion Papers.
  4. Alison Booth & Melvyn Coles, 2010. "Education, Matching, and the Allocative Value of Romance," Journal of the European Economic Association, European Economic Association, vol. 8(4), pages 744-775, 06.
  5. Philip Trostel & Ian Walker, 2006. "Education and Work," Education Economics, Taylor & Francis Journals, vol. 14(4), pages 377-399.
  6. repec:dgr:uvatin:20050036 is not listed on IDEAS
  7. Bas Jacobs, 2005. "Optimal Income Taxation with Endogenous Human Capital," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 295-315, 05.
  8. Booth, Alison L. & Coles, Melvyn, 2007. "A microfoundation for increasing returns in human capital accumulation and the under-participation trap," European Economic Review, Elsevier, vol. 51(7), pages 1661-1681, October.
  9. Alberto Alesina & Andrea Ichino & Loukas Karabarbounis, 2007. "Gender Based Taxation and the Division of Family Chores," NBER Working Papers 13638, National Bureau of Economic Research, Inc.
  10. Rios-Rull, Jose-Victor, 1993. "Working in the Market, Working at Home, and the Acquisition of Skills: A General-Equilibrium Approach," American Economic Review, American Economic Association, vol. 83(4), pages 893-907, September.
  11. repec:dgr:uvatin:2005036 is not listed on IDEAS
  12. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
  13. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
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