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Tax Policy, Investments in Human and Physical Capital, and Productivity

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Listed:
  • Marc Nerlove
  • Assaf Razin
  • Efraim Sadka
  • Robert K. von Weizsacker

Abstract

This paper analyzes the implications of tax policy for the accumulation of human and physical capital and for the overall productivity level of the economy. A comprehensive income tax, applying to both labour income and capital income. discriminates against investments in human capital relative to investments in physical capital. Hence. it has an adverse impact on human capital accumulation. Taking into account a positive external effect of investments in human capital on overall productivity, the adverse effect of income taxation on human capital investments is significantly magnified.

Suggested Citation

  • Marc Nerlove & Assaf Razin & Efraim Sadka & Robert K. von Weizsacker, 1990. "Tax Policy, Investments in Human and Physical Capital, and Productivity," NBER Working Papers 3531, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3531
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    File URL: http://www.nber.org/papers/w3531.pdf
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    References listed on IDEAS

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    1. Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 673-702, August.
    2. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Razin, Assaf & Sadka, Efraim & Swagel, Phillip, 2002. "Tax burden and migration: a political economy theory and evidence," Journal of Public Economics, Elsevier, vol. 85(2), pages 167-190, August.
    2. Christou, Costas, 2001. "Differential Borrowing Constraints and Investment in Human Capital," Journal of Macroeconomics, Elsevier, vol. 23(2), pages 277-295, April.
    3. Tatsuo Hatta & Hideki Nishioka, 1992. "The Dynamic Efficiency Effect of a Change in the Marginal Capital Income Tax Rate: The Nakasone-Takeshita Tax Reform," NBER Chapters,in: The Political Economy of Tax Reform, NBER-EASE Volume 1, pages 159-185 National Bureau of Economic Research, Inc.

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