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Redistribution and Education Subsidies are Siamese Twins

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  • Bovenberg, A.L.

    (Tilburg University, Center For Economic Research)

  • Jacobs, B.

    (Tilburg University, Center For Economic Research)

Abstract

We develop models of optimal linear and non-linear income taxation with endogenous human capital formation to explore optimal education subsidies. Optimal subsidies on education ensure efficiency in human capital accumulation and thus play an important role in alleviating the tax distortions on learning induced by redistributive policies. If the government cannot verify all investments in human capital, education policy offsets some but not all tax-induced distortions on learning. Non-pecuniary educational costs (benefits) may increase (decrease) subsidies on education, especially if they are complementary to work effort. See publication in Journal of Public Economics , 2005, 89(11-12), 2005-35.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bovenberg, A.L. & Jacobs, B., 2001. "Redistribution and Education Subsidies are Siamese Twins," Discussion Paper 2001-82, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:1309589e-a7d2-4ad6-ab7b-1d42e16c80d9
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    More about this item

    Keywords

    redistribution; education; subsidies; human capital; taxation; income tax;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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