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Whither the Progressive Tax?

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  • 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
    Date of revision:
    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. David Andolfatto & Scott Hendry & Kevin Moran, 2002. "Labour Markets, Liquidity, and Monetary Policy Regimes," Working Papers 02-32, Bank of Canada.
    2. 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 F150-F166, February.
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    7. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
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    10. Elizabeth M. Caucutt & Krishna B. Kumar, 2000. "Higher Education Subsidies and Heterogeneity, A Dynamic Analysis," RCER Working Papers 472, University of Rochester - Center for Economic Research (RCER).
    11. Nicholas Barr, 2004. "Higher Education Funding," Oxford Review of Economic Policy, Oxford University Press, vol. 20(2), pages 264-283, Summer.
    12. 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.
    13. Ali Dib & Mohamed Gammoudi & Kevin Moran, 2006. "Forecasting Canadian Time Series With the New-Keynesian Model," Working Papers Central Bank of Chile 382, Central Bank of Chile.
    14. 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.
    15. Nicholas Barr, 2004. "Higher education funding," LSE Research Online Documents on Economics 288, London School of Economics and Political Science, LSE Library.
    16. 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.
    17. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
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