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Effects of Redistribution Policies - Who Gains and Who Loses?

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  • von Greiff, Camilo

    () (Dept. of Economics, Stockholm University)

Abstract

The paper combines optimal taxation theory with human capital theory and develops a theoretical model with endogenous wages and education decision, in which redistributive policy experiments are carried out and assessed. It is argued that general equilibrium effects of labor income taxation on wages may counteract fiscal redistribution. It is also shown that education subsidies may only benefit skilled workers, suggesting that this subsidy can merely be viewed as a redistribution from unskilled to skilled individuals. Therefore, optimal policy involves a lump-sum education tax in the form of a negative education subsidy.

Suggested Citation

  • von Greiff, Camilo, 2007. "Effects of Redistribution Policies - Who Gains and Who Loses?," Research Papers in Economics 2007:12, Stockholm University, Department of Economics.
  • Handle: RePEc:hhs:sunrpe:2007_0012
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    File URL: http://www2.ne.su.se/paper/wp07_12.pdf
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    References listed on IDEAS

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    1. Allen, Franklin, 1982. "Optimal linear income taxation with general equilibrium effects on wages," Journal of Public Economics, Elsevier, vol. 17(2), pages 135-143, March.
    2. Philip Trostel & Ian Walker, 2006. "Education and Work," Education Economics, Taylor & Francis Journals, vol. 14(4), pages 377-399.
    3. Eytan Sheshinski, 1972. "The Optimal Linear Income-tax," Review of Economic Studies, Oxford University Press, vol. 39(3), pages 297-302.
    4. Ray C. Fair, 1971. "The Optimal Distribution of Income," The Quarterly Journal of Economics, Oxford University Press, vol. 85(4), pages 551-579.
    5. Brett, Craig & Weymark, John A., 2003. "Financing education using optimal redistributive taxation," Journal of Public Economics, Elsevier, vol. 87(11), pages 2549-2569, October.
    6. Joshua D. Angrist & Alan B. Keueger, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 979-1014.
    7. William Blankenau, 1999. "A Welfare Analysis of Policy Responses to the Skilled Wage Premium," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 820-849, October.
    8. Helmuth Cremer & Pierre Pestieau & Emmanuel Thibault & Jean-Pierre Vidal, 2005. "Optimal Tax and Education Policy When Agents Differ in Altruism and Productivity," Annals of Economics and Finance, Society for AEF, vol. 6(2), pages 209-228, November.
    9. Feldstein, Martin, 1973. "On the optimal progressivity of the income tax," Journal of Public Economics, Elsevier, vol. 2(4), pages 357-376.
    10. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
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    More about this item

    Keywords

    Income Redistribution; Education Subsidies;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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