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How Do Taxes Affect Human Capital? The Role of Intergenerational Mobility

  • Lutz Hendricks

    (Department of Economics, Arizona State University)

This paper investigates how explicitly modeling the intergenerational transmission of human capital modifies the effects of tax policies obtained from standard life-cycle models. The main finding is that the intergenerational persistence of human capital is not an important determinant of the steady state and transitional effects of several commonly studied tax policies. Conventional life-cycle models closely approximate the predictions generated by models with realistic intergenerational mobility properties. However, intergenerational persistence can substantially magnify the effects of policies that distort job-training investment. (Copyright: Elsevier)

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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 4 (2001)
Issue (Month): 3 (July)
Pages: 695-735

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Handle: RePEc:red:issued:v:4:y:2001:i:3:p:695-735
Note: A technical appendix is available
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