Education Supply and Growth: the Role of Progressive Taxation
This paper studies the theoretical effects of public policies on growth by stressing the major incidence of both the tax structure and the public education supply. Given an education supply, an increase in the progressivity of income taxation shortens the educational effort since the benefits to education are reduced relatively to its cost. But an increase in the proportion of teachers shortens the educational effort if the adults bear an higher tax rate than the young. For sufficiently high degrees of tax progressivity, an overdevelopment of the education supply is thus harmful for long-run growth. This means there exists a proportion of teachers that maximizes growth.
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