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Whither the Progressive Tax?

Author

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  • Sylvain Dessy
  • Safa Ragued

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.

Suggested Citation

  • Sylvain Dessy & Safa Ragued, 2013. "Whither the Progressive Tax?," Cahiers de recherche 1340, CIRPEE.
    • Handle: RePEc:lvl:lacicr:1340
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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2013/CIRPEE13-40.pdf
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    References listed on IDEAS

    as
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    5. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
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    7. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    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.
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    More about this item

    Keywords

    Tax progressivity; higher education; skilled formation; capital inflows; general equilibrium;

    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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