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Money or joy: The choice of educational type

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  • Alstadsí¦ter, Annette
  • Kolm, Ann-Sofie
  • Larsen, Birthe

Abstract

This paper examines the effect of taxes on individuals' educational choices, and thus on the economy's skill composition. A proportional labour tax induces too many workers with high innate ability to choose education that is associated with high consumption and relatively low effort. This increases mismatching of skills and aggregate unemployment. The government could correct this distortion by use of subsidies or differentiated tuition fees. Furthermore, we consider the conditions under which each group of educated workers would support use of nonoptimal taxes and tuition fees.

Suggested Citation

  • Alstadsí¦ter, Annette & Kolm, Ann-Sofie & Larsen, Birthe, 2008. "Money or joy: The choice of educational type," European Journal of Political Economy, Elsevier, vol. 24(1), pages 107-122, March.
  • Handle: RePEc:eee:poleco:v:24:y:2008:i:1:p:107-122
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    Cited by:

    1. Bas Jacobs, 2013. "Optimal redistributive tax and education policies in general equilibrium," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(2), pages 312-337, April.
    2. Sana Sellami & Dieter Verhaest & Walter Nonneman & Walter Van Trier, 2020. "Education as investment, consumption or adapting to social norm: implications for educational mismatch among graduates," Education Economics, Taylor & Francis Journals, vol. 28(1), pages 26-45, January.
    3. Annette Alstadsæter, 2011. "Measuring the Consumption Value of Higher Education," CESifo Economic Studies, CESifo, vol. 57(3), pages 458-479, September.

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