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Federation's alternative tax constitutions and risky education

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  • Poutvaara, Panu

Abstract

We analyze a two-period modell where risk-averse students divide their time between risky education, leisure, and work. The educated can migrate. Wagetax financed transfer to students acts as an insurance, and increases both investment in education and demand for leisure. We drive sufficient conditions for tax competition to lead to too low wage tax rates. We suggest, that the educated should pay their wage taxes to the region which has financed their education. We show that this would increase taxation and investment in education, and would benefit also the owners of the complementary factor.

Suggested Citation

  • Poutvaara, Panu, 1999. "Federation's alternative tax constitutions and risky education," ZEW Discussion Papers 99-42, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:5255
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    References listed on IDEAS

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    Cited by:

    1. Andersson, Fredrik W. & Konrad, Kai A., 2001. "Globalization and Human Capital Formation," IZA Discussion Papers 245, Institute of Labor Economics (IZA).
    2. Andersson, Fredrik & Konrad, Kai A., 2003. "Human capital investment and globalization in extortionary states," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1539-1555, August.
    3. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.

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