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Tax Policy and Returns to Education

  • Alison L. Booth
  • Melvyn B. Coles

This paper considers how asymmetric tax treatment, where labour market earnings are taxed but household production is untaxed, aspects educational choice and labour supply. We show that taxes on labour market earnings can generate a large (non-marginal) switch to home production and the ensuing deadweight losses are large. Using a cross-country panel, we find that gender differences in labour supply responses to tax policy can explain differences in aggregate labour supply and years of education across countries.

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File URL: https://www.cbe.anu.edu.au/researchpapers/cepr/DP591.pdf
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Paper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 591.

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Date of creation: Dec 2008
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Handle: RePEc:auu:dpaper:591
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  1. 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.
  2. A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
  3. 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.
  4. Philip Trostel & Ian Walker, 2006. "Education and Work," Education Economics, Taylor & Francis Journals, vol. 14(4), pages 377-399.
  5. Bas Jacobs, 2005. "Optimal Income Taxation with Endogenous Human Capital," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 295-315, 05.
  6. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
  7. Alberto Alesina & Andrea Ichino & Loukas Karabarbounis, 2011. "Gender-Based Taxation and the Division of Family Chores," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 1-40, May.
  8. Booth, Alison L. & Coles, Melvyn, 2005. "Education, Matching and the Allocative Value of Romance," IZA Discussion Papers 1649, Institute for the Study of Labor (IZA).
  9. Rios-Rull, Jose-Victor, 1993. "Working in the Market, Working at Home, and the Acquisition of Skills: A General-Equilibrium Approach," American Economic Review, American Economic Association, vol. 83(4), pages 893-907, September.
  10. Apps, P. F. & Rees, R., 1996. "Labour supply, household production and intra-family welfare distribution," Journal of Public Economics, Elsevier, vol. 60(2), pages 199-219, May.
  11. repec:dgr:uvatin:2005036 is not listed on IDEAS
  12. Alison L. Booth & Melvyn Coles, 2006. "A Microfoundation for Increasing Returns in Human Capital Accumulation and the Under-Participation Trap," CEPR Discussion Papers 543, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  13. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
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