Tax Effects, Search Unemployment, and the Choice of Educational Type
This paper examines the effect of taxes on the individuals’ choices of educational direction, and thus on the economy’s skill composition. A proportional labour income tax induces too many workers with high innate ability to choose an educational type with high consumption value and low effort costs. This increases the skill mismatch and aggregate unemployment in the economy. The government can correct for this distortion by use of differentiated tuition fees or tax rates.
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- Michael J. Boskin, 1975. "Notes on the Tax Treatment of Human Capital," NBER Working Papers 0116, National Bureau of Economic Research, Inc.
- Driffill, E John & Rosen, Harvey S, 1983.
"Taxation and Excess Burden: A Life Cycle Perspective,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 671-83, October.
- E. John Driffill & Harvey S. Rosen, 1981. "Taxation and Excess Burden: A Life-Cycle Perspective," NBER Working Papers 0698, National Bureau of Economic Research, Inc.
- Roger H. Gordon & Julie Berry Cullen, 2002. "Taxes and Entrepreneurial Activity: Theory and Evidence for the U.S," NBER Working Papers 9015, National Bureau of Economic Research, Inc.
- R. Glenn Hubbard & William M. Gentry, 2000. "Tax Policy and Entrepreneurial Entry," American Economic Review, American Economic Association, vol. 90(2), pages 283-287, May.
- Annette Alstadsæter, 2003. "Income Tax, Consumption Value of Education, and the Choice of Educational Type," CESifo Working Paper Series 1055, CESifo Group Munich.
- Bruce, Donald, 2000. "Effects of the United States tax system on transitions into self-employment," Labour Economics, Elsevier, vol. 7(5), pages 545-574, September.
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