On the positive effects of taxation on education
In the economic literature a constant tax rate on labor income has usually a neutral or negative effect on education. The effect is neutral in the absence of non-deductible costs and it is negative in the presence of them. A positive effect is obtained in the presence of non-deductible profits or uncertainty in the returns to education. In this model education is treated as a signalling device for the level of human capital and agents choose freely their labor supply under certainty and perfect financial markets. Within this framework a constant tax rate on labor income has a positive effect on education under certainty and in the absence of non-deductible costs or profits as long as consumption and leisure are complementary and the amount of transfers and family income is low enough.
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- Kelly Bedard, 2001.
"Human Capital versus Signaling Models: University Access and High School Dropouts,"
Journal of Political Economy,
University of Chicago Press, vol. 109(4), pages 749-775, August.
- Kelly Bedard, "undated". "Human Capital Versus Signaling Models: University Access and High School Drop-outs," Claremont Colleges Working Papers 1999-01, Claremont Colleges.
- Kelly Bedard, "undated". "Human Capital Versus Signaling Models: University Access and High School Drop-outs," Canadian International Labour Network Working Papers 19, McMaster University.
- Sveinbjörn Blöndal & Simon Field & Nathalie Girouard, 2003. "Investment in human capital through upper-secondary and tertiary education," OECD Economic Studies, OECD Publishing, vol. 2002(1), pages 41-89.
- Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352-352.
- Annette Alstadsæter, 2003. "Income Tax, Consumption Value of Education, and the Choice of Educational Type," CESifo Working Paper Series 1055, CESifo Group Munich. Full references (including those not matched with items on IDEAS)
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