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Whither the Progressive Tax?

Author Info

Listed author(s):
  • Sylvain Dessy
  • Safa Ragued
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    Abstract

    The progressive wage tax is the instrument commonly used by democracies to fund public expenditures. Yet it still divides opinions about its impact on skill formation. We develop a general equilibrium model to analyze this impact, in the context of uncertain return on higher education. We show that the quantitative impact on skill formation of switching from the flat to the progressive tax varies with the level of efficiency with which higher education imparts graduates with suitable skills. This impact is negative when the level of efficiency of higher education is low and positive when it is high.

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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2013/CIRPEE13-40.pdf
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    Paper provided by CIRPEE in its series Cahiers de recherche with number 1340.

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    Date of creation: 2013
    Handle: RePEc:lvl:lacicr:1340
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    Keywords: Tax progressivity; higher education; skilled formation; capital inflows; general equilibrium;

    Find related papers by JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    2. Hanushek, Eric A. & Leung, Charles Ka Yui & Yilmaz, Kuzey, 2003. "Redistribution through education and other transfer mechanisms," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1719-1750, November.
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    8. Caucutt, Elizabeth M. & Kumar, Krishna B., 2003. "Higher education subsidies and heterogeneity: a dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 27(8), pages 1459-1502, June.
    9. John B. Burbidge & Kirk A. Collins & James B. Davies & Lonnie Magee, 2012. "Effective tax and subsidy rates on human capital in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 189-219, February.
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    13. Nicholas Barr, 2004. "Higher education funding," LSE Research Online Documents on Economics 288, London School of Economics and Political Science, LSE Library.
    14. J. B. Burbidge & L. Magee & A. Leslie Robb, 2002. "The Education Premium in Canada and the United States," Canadian Public Policy, University of Toronto Press, vol. 28(2), pages 203-217, June.
    15. Michael B. Coelli, 2009. "Tuition fees and equality of university enrolment," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 1072-1099, August.
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    17. David Greenaway & Michelle Haynes, 2003. "Funding Higher Education in The UK: The Role of Fees and Loans," Economic Journal, Royal Economic Society, vol. 113(485), pages 150-166, February.
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