Human capital formation and general equilibrium treatment effects: a study of tax and tuition policy
Policies to promote human capital formation have been advocated as a remedy for reducing the economy-wide problem of rising wage inequality. These policies are national in character and are designed to substantially alter the proportion of the work-force that is skilled. Yet the methods used to evaluate these policies are partial equilibrium in nature and do not take account of the consequences of the changes in skill prices that are produced by the policies. This paper summarises our research on general equilibrium evaluation of tuition and tax policies. We compare estimates of policy impact from our approach with those obtained from conventional partial equilibrium ‘treatment effect’ approaches to policy evaluation, and find substantial differences. Conventional partial equilibrium approaches present an overly optimistic view of what tax and tuition policy can achieve because they ignore the change in human capital investment levels induced by the change in prices due to the policy. In addition, conventional partial equilibrium approaches fail to provide an accurate assessment of the welfare consequences of these policies.
Volume (Year): 20 (1999)
Issue (Month): 1 (March)
|Contact details of provider:|| Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE|
Phone: (+44) 020 7291 4800
Fax: (+44) 020 7323 4780
Web page: http://www.ifs.org.uk
More information through EDIRC
|Order Information:|| Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James J. Heckman & Edward J. Vytlacil, 2000. "Local Instrumental Variables," NBER Technical Working Papers 0252, National Bureau of Economic Research, Inc.
- Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts," NBER Working Papers 6385, National Bureau of Economic Research, Inc.
- James Davies & John Whalley, 1991.
"Taxes and Capital Formation: How Important is Human Capital?,"
in: National Saving and Economic Performance, pages 163-200
National Bureau of Economic Research, Inc.
- James Davies & John Whalley, 1989. "Taxes and Capital Formation: How Important is Human Capital?," NBER Working Papers 2899, National Bureau of Economic Research, Inc.
- Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-350, April.
- James J. Heckman & Lance Lochner & Christopher Taber, 1999. "General Equilibrium Cost Benefit Analysis of Education and Tax Policies," NBER Working Papers 6881, National Bureau of Economic Research, Inc.
- Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 11-44, August.
- B. Douglas Bernheim & John B. Shoven, 1991. "National Saving and Economic Performance," NBER Books, National Bureau of Economic Research, Inc, number bern91-2, September.
When requesting a correction, please mention this item's handle: RePEc:ifs:fistud:v:20:y:1999:i:1:p:25-40. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Emma Hyman)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.