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A Case for Taxing Education

  • Tomer Blumkin
  • Efraim Sadka

We illustrate a novel informational feature of education, which the government may utilize. Discretionary decisions of individuals to acquire education may serve as an additional signal (to earned labor income) on the underlying unobserved innate earning ability, thereby mitigating the informational constraint faced by the government. We establish a case for taxing education, as a supplement to the labor income tax.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1440.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1440
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  1. Emmanuel Saez, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Oxford University Press, vol. 68(1), pages 205-229.
  2. 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).
  3. Saint-Paul, Gilles, 1994. "Unemployment, wage rigidity, and the returns to education," European Economic Review, Elsevier, vol. 38(3-4), pages 535-543, April.
  4. Angus S. Deaton, 1979. "Optimal Taxes and the Structure of Preferences," Working Papers 506, Princeton University, Department of Economics, Industrial Relations Section..
  5. Eckstein, Zvi & Zilcha, Itzhak, 1994. "The effects of compulsory schooling on growth, income distribution and welfare," Journal of Public Economics, Elsevier, vol. 54(3), pages 339-359, July.
  6. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
  7. Gradstein, Mark, 2000. "An economic rationale for public education: The value of commitment," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 463-474, April.
  8. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post--secondary Schooling," Economic Journal, Royal Economic Society, vol. 112(482), pages 705-734, October.
  9. Razin,Assaf & Sadka,Efraim, 2001. "Labor, Capital, and Finance," Cambridge Books, Cambridge University Press, number 9780521780742, September.
  10. Boadway, R. & Marchand, M., 1990. "The use of public expenditures for distributive purposes," CORE Discussion Papers 1990066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Ulph, David, 1977. "On the optimal distribution of income and educational expenditure," Journal of Public Economics, Elsevier, vol. 8(3), pages 341-356, December.
  12. Barham, V. & Boadway, R. & Marchand, M. & Pestieau, P., . "Education and the poverty trap," CORE Discussion Papers RP 1173, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Heckman, James J., 2000. "Policies to foster human capital," Research in Economics, Elsevier, vol. 54(1), pages 3-56, March.
  14. Craig Brett & John A. Weymark, 2000. "Financing Education Using Optimal Redistributive Taxation," Vanderbilt University Department of Economics Working Papers 0038, Vanderbilt University Department of Economics, revised May 2001.
  15. 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.
  16. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
  17. Tuomala, Matti, 1986. "On the optimal income taxation and educational decisions," Journal of Public Economics, Elsevier, vol. 30(2), pages 183-198, July.
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