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Optimal Policy for Investment in Human Capital in the Light of Optimal Tax Theory (Inwestycje w kapital ludzki w swietle optymalnej teorii podatkowej)

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  • Sylwia Radomska

    (Faculty of Management, University of Warsaw)

Abstract

The increasing amount of student loan is becoming a pressing issue for the US economy, as it exceeds 1.4 trillion dollars (or 7.2% of GDP), thus requiring a policy change. This paper presents economic literature on optimal taxation with human capital, which provides foundations for evaluating the long-run effects of taxation and endogenous investment in skills. I review insights from the dynamic models. The literature in the field considers two instruments: turning repayments income-contingent and providing subsidies to education costs. I summarize the results from theoretical and simulation studies. Income-contingent repayment schemes can improve welfare, whereas the effects of education subsidies may be positive only under some assumptions.

Suggested Citation

  • Sylwia Radomska, 2019. "Optimal Policy for Investment in Human Capital in the Light of Optimal Tax Theory (Inwestycje w kapital ludzki w swietle optymalnej teorii podatkowej)," Research Reports, University of Warsaw, Faculty of Management, vol. 1(30), pages 34-42.
    • Handle: RePEc:sgm:resrep:v:1:i:30:y:2019:p:34-42
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    optimal taxation with human capital; income-contingent repayment; education subsidies;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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