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Evaluating the effect of tax deductions on training

Listed author(s):
  • Edwin Leuven

    (University of Amsterdam)

  • Hessel Oosterbeek

    (University of Amsterdam)

Due to a tax law implemented in 1998, Dutch employers can claim an extra tax deduction when they train employees aged 40 years or older. This causes a discontinuity in a firm's cost of training an employee. We exploit this discontinuity to identify two effects: the effect of the tax deduction on training participation, and the effect of training participation on wages. We find that the training rate of workers just above 40 is about 15-20 percent higher than the training rate of workers just below 40. This difference cannot entirely be attributed to the stimulating effect of the tax deduction. Our estimates show that spill- over effects on workers younger than 40 are so substantial that the net effect of the age-dependent tax deduction is zero.

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File URL: http://econwpa.repec.org/eps/lab/papers/0205/0205001.pdf
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Paper provided by EconWPA in its series Labor and Demography with number 0205001.

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Length: 26 pages
Date of creation: 08 May 2002
Handle: RePEc:wpa:wuwpla:0205001
Note: Type of Document - pdf; pages: 26
Contact details of provider: Web page: http://econwpa.repec.org

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