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Taxation, Human Capital, and Uncertainty

Author

Listed:
  • Jonathan Eaton

    (Princeton University)

  • Harvey S. Rosen

    (Princeton University)

Abstract

This paper analyzes the effect of wage and interest taxation on investment in human capital. It is shown that results derived under the assumption that human.capital is a riskless asset fail to obtain when the return on human capi- tal is uncertain. The interaction of the human capital investment decision with savings, consumption and labor-leisure choices are taken into account. An implication of the analysis is that, when the rate of return on human capi- tal is stochastic, efficient taxation requires positive taxation of wage income even when lump-sum taxation is feasible.

Suggested Citation

  • Jonathan Eaton & Harvey S. Rosen, 1979. "Taxation, Human Capital, and Uncertainty," Working Papers 497, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:117
    as

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    File URL: http://dataspace.princeton.edu/jspui/handle/88435/dsp015m60qr90f
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    References listed on IDEAS

    as
    1. Weiss, Yoram, 1971. "Investment in Graduate Education," American Economic Review, American Economic Association, vol. 61(5), pages 833-852, December.
    2. Weiss, Yoram, 1971. "Learning by doing and occupational specialization," Journal of Economic Theory, Elsevier, vol. 3(2), pages 189-198, June.
    3. Ryder, Harl E & Stafford, Frank P & Stephan, Paula E, 1976. "Labor, Leisure and Training over the Life Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(3), pages 651-674, October.
    4. A. B. Atkinson, 1971. "Capital Taxes, the Redistribution of Wealth and Individual Savings," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 209-227.
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    More about this item

    JEL classification:

    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables
    • L69 - Industrial Organization - - Industry Studies: Manufacturing - - - Other

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