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A Theory of Perverse Redistribution in Higher Education and Income Tax Progressivity in Europe

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  • Michele Gubello
  • Nora Strecker

Abstract

This paper studies the effect of income tax progressivity on the disproportionate use of publicly funded higher education. We show that more progressive tax systems increase low-income households’ net fiscal benefit of higher education, making their children more likely to attend university. To increase the university enrollment of children from low-income households, the “degree” of income tax progressivity must increase along the income distribution. “Weakly progressive” tax systems can determine a perverse redistribution equilibrium, in which poorer households subsidize the higher education for richer households.

Suggested Citation

  • Michele Gubello & Nora Strecker, 2024. "A Theory of Perverse Redistribution in Higher Education and Income Tax Progressivity in Europe," LIS Working papers 889, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:889
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    More about this item

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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