Efficient Tax Policy Ranks Education Higher Than Saving
Assuming a two-period model with endogenous choices of labour, education, and saving, it is shown to be second-best efficient not to distort the choice of education. In general this implies distorting the saving decision. Hence a strict order of policy priority is derived. Efficient tax policy ranks education higher than saving. The result assumes an isoelastic earnings function and holds else for arbitrary utility functions. Isoelasticity of earnings is justified with reference to the empirically well-founded Power Law of Learning.
|Date of creation:||Apr 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wolfram F. Richter, 2007. "Taxing Human Capital Efficiently – The Double Dividend of Taxing Nonqualified Labour More Heavily Than Qualified Labour," Ruhr Economic Papers 0012, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
- Nielsen, Soren Bo & Sorensen, Peter Birch, 1997. "On the optimality of the Nordic system of dual income taxation," Journal of Public Economics, Elsevier, vol. 63(3), pages 311-329, February.
- Carneiro, Pedro & Heckman, James J., 2003.
"Human Capital Policy,"
IZA Discussion Papers
821, Institute for the Study of Labor (IZA).
- Bas Jacobs & A. Lans Bovenberg, 2005. "Human Capital and Optimal Positive Taxation of Capital Income," Tinbergen Institute Discussion Papers 05-035/3, Tinbergen Institute.
- Lans Bovenberg, A. & Jacobs, Bas, 2005.
"Redistribution and education subsidies are Siamese twins,"
Journal of Public Economics,
Elsevier, vol. 89(11-12), pages 2005-2035, December.
- Bovenberg, A Lans & Jacobs, Bas, 2001. "Redistribution and Education Subsidies are Siamese Twins," CEPR Discussion Papers 3099, C.E.P.R. Discussion Papers.
- Bovenberg, A.L. & Jacobs, B., 2001. "Redistribution and Education Subsidies are Siamese Twins," Discussion Paper 2001-82, Tilburg University, Center for Economic Research.
- Wolfram F. Richter, 2006.
"Taxing Human Capital Efficiently: The Double Dividend of Taxing Non-qualified Labour more Heavily than Qualified Labour,"
CESifo Working Paper Series
1832, CESifo Group Munich.
- Richter, Wolfram F., 2007. "Taxing Human Capital Efficiently – The Double Dividend of Taxing Nonqualified Labour More Heavily Than Qualified Labour," Ruhr Economic Papers 12, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
- Richter, Wolfram F., 2006. "Taxing Human Capital Efficiently: The Double Dividend of Taxing Non-Qualified Labour More Heavily Than Qualified Labour," IZA Discussion Papers 2328, Institute for the Study of Labor (IZA).
- Andrew Atkeson & V.V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-17.
- Kenneth L. Judd, 1982.
"Redistributive Taxation in a Simple Perfect Foresight Model,"
572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
- Bovenberg, A Lans & Jacobs, Bas, 2005.
"Human Capital and Optimal Positive Taxation of Capital Income,"
CEPR Discussion Papers
5047, C.E.P.R. Discussion Papers.
- Bas Jacobs & A. Bovenberg, 2010. "Human capital and optimal positive taxation of capital income," International Tax and Public Finance, Springer, vol. 17(5), pages 451-478, October.
- Larry E. Jones & Rodolfo E. Manuelli & Peter E. Rossi, 1993.
"On the Optimal Taxation of Capital Income,"
NBER Working Papers
4525, National Bureau of Economic Research, Inc.
- Trostel, Philip A, 2002. "Should Education Be Publicly Provided?," Bulletin of Economic Research, Wiley Blackwell, vol. 54(4), pages 373-91, October.
- Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-50, April.
- repec:dgr:uvatin:2005035 is not listed on IDEAS
- repec:cup:cbooks:9780521873161 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp3451. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.