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Taxing education in Ramsey's tradition

  • Richter, Wolfram F.

Assuming a two-period model with endogenous choices of labour, education, and saving, it is shown to be second-best efficient to deviate from Ramsey's Rule and to distort qualified labour less than nonqualified labour. Furthermore, if the earnings function displays constant elasticity, the choice of education should not be distorted. With the necessary qualifications the results extend to the case when taxpayers are heterogeneous and when the planner trades off efficiency against equity.

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File URL: http://www.sciencedirect.com/science/article/B6V76-4X8RCT3-1/2/7d033eac72fb1ae0142e028cf0be8cb7
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 11-12 (December)
Pages: 1254-1260

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:11-12:p:1254-1260
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Richter, Wolfram F. & Braun, Christoph, 2009. "Efficient Subsidization of Human Capital Accumulation with Overlapping Generations and Endogenous Growth," IZA Discussion Papers 4629, Institute for the Study of Labor (IZA).
  2. Richter, Wolfram F., 2006. "Taxing Human Capital Efficiently: The Double Dividend of Taxing Non-Qualified Labour More Heavily Than Qualified Labour," IZA Discussion Papers 2328, Institute for the Study of Labor (IZA).
  3. Sandmo, Agnar, 1974. "A Note on the Structure of Optimal Taxation," American Economic Review, American Economic Association, vol. 64(4), pages 701-06, September.
  4. Bovenberg, A Lans & Jacobs, Bas, 2005. "Human Capital and Optimal Positive Taxation of Capital Income," CEPR Discussion Papers 5047, C.E.P.R. Discussion Papers.
  5. Boadway, R. & Marceau, N. & Marchand, M., . "Investment in education and the time inconsistency of redistributive tax policy," CORE Discussion Papers RP -1219, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Fredrik Andersson & Kai A. Konrad, 2002. "Human Capital Investment and Globalization in Extortionary States," CESifo Working Paper Series 703, CESifo Group Munich.
  7. Richter, Wolfram F., 2009. "Taxing education in Ramsey's tradition," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1254-1260, December.
  8. Dan Anderberg, 2008. "Optimal Policy and the Risk Properties of Human Capital Reconsidered," CESifo Working Paper Series 2451, CESifo Group Munich.
  9. Bas Jacobs & Lans Bovenberg, 2008. "Optimal Taxation of Human Capital and theEarnings Function," CESifo Working Paper Series 2250, CESifo Group Munich.
  10. Atkinson, A. B. & Stiglitz, J. E., 1972. "The structure of indirect taxation and economic efficiency," Journal of Public Economics, Elsevier, vol. 1(1), pages 97-119, April.
  11. Berthold U. Wigger, 2004. "Are Higher Education Subsidies Second Best?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(1), pages 65-82, 03.
  12. Lans Bovenberg, A. & Jacobs, Bas, 2005. "Redistribution and education subsidies are Siamese twins," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2005-2035, December.
  13. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  14. 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.
  15. Richter, Wolfram F., 2008. "Efficient Tax Policy Ranks Education Higher Than Saving," IZA Discussion Papers 3451, Institute for the Study of Labor (IZA).
  16. repec:cup:cbooks:9780521117562 is not listed on IDEAS
  17. Jones, Larry E. & Manuelli, Rodolfo E. & Rossi, Peter E., 1997. "On the Optimal Taxation of Capital Income," Journal of Economic Theory, Elsevier, vol. 73(1), pages 93-117, March.
  18. da Costa, Carlos E. & Maestri, Lucas J., 2007. "The risk properties of human capital and the design of government policies," European Economic Review, Elsevier, vol. 51(3), pages 695-713, April.
  19. Nielsen, Soren Bo & Sorensen, Peter Birch, 1997. "On the optimality of the Nordic system of dual income taxation," Journal of Public Economics, Elsevier, vol. 63(3), pages 311-329, February.
  20. repec:cup:cbooks:9780521873161 is not listed on IDEAS
  21. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
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