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A Case for Taxing Education

Author

Listed:
  • Tomer Blumkin
  • Efraim Sadka

Abstract

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.

Suggested Citation

  • Tomer Blumkin & Efraim Sadka, 2005. "A Case for Taxing Education," CESifo Working Paper Series 1440, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1440
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1440.pdf
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    References listed on IDEAS

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    1. James Heckman, 2011. "Policies to foster human capital," Educational Studies, Higher School of Economics, issue 3, pages 73-137.
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    3. Boadway, Robin & Marceau, Nicolas & Marchand, Maurice, 1996. "Investment in Education and the Time Inconsistency of Redistributive Tax Policy," Economica, London School of Economics and Political Science, pages 171-189.
    4. Razin,Assaf & Sadka,Efraim, 2001. "Labor, Capital, and Finance," Cambridge Books, Cambridge University Press, number 9780521785570, November.
    5. 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.
    6. Deaton, Angus, 1981. "Optimal Taxes and the Structure of Preferences," Econometrica, Econometric Society, vol. 49(5), pages 1245-1260, September.
    7. 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.
    8. Boadway, Robin & Marchand, Maurice, 1995. "The Use of Public Expenditures for Redistributive Purposes," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 45-59, January.
    9. Brett, Craig & Weymark, John A., 2003. "Financing education using optimal redistributive taxation," Journal of Public Economics, Elsevier, vol. 87(11), pages 2549-2569, October.
    10. Eckstein, Zvi & Zilcha, Itzhak, 1994. "The effects of compulsory schooling on growth, income distribution and welfare," Journal of Public Economics, Elsevier, pages 339-359.
    11. 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.
    12. Saint-Paul, Gilles, 1994. "Unemployment, wage rigidity, and the returns to education," European Economic Review, Elsevier, pages 535-543.
    13. Barham, Vicky & Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1995. "Education and the poverty trap," European Economic Review, Elsevier, pages 1257-1275.
    14. Tuomala, Matti, 1986. "On the optimal income taxation and educational decisions," Journal of Public Economics, Elsevier, vol. 30(2), pages 183-198, July.
    15. Emmanuel Saez, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Oxford University Press, vol. 68(1), pages 205-229.
    16. 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.
    17. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
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    Cited by:

    1. Gonzales-Eiras, Martín & Niepelt, Dirk, 2004. "Sustaining Social Security," Seminar Papers 731, Stockholm University, Institute for International Economic Studies.
    2. Tomer Blumkin & Efraim Sadka, 2008. "A case for taxing education," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(2), pages 145-163, April.

    More about this item

    Keywords

    optimal taxation; re-distribution; education; inequality;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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