Bas Jacobs - ASE
The Double Dividend of Education
This paper studies optimal linear and non-linear redistributive tax and education policies in models with endogenous human capital formation, endogenous labor supply and endogenous wage rates. A ‘double dividend’ of education subsidies generating more equality in before-tax wages through general equilibrium effects and lower distorting tax rates is not likely to occur. In linear taxation models with human capital formation on the intensive margin education is not subsidized and overall production efficiency is obtained. With human capital formation on the extensive margin education is taxed. Only taxes on education allow for lower labor income taxes in all cases. Non-linear taxation models show the same mechanisms as the linear taxation cases and allow for general preferences and production technologies. The consequences of skill-biased technical change for the setting of optimal tax and education policies are explored.
Keywords: human capital, general equilibrium, education subsidies, progressive taxation, direct and indirect redistribution.
JEL codes: H2, H5, I2, J2.
Lunch is provided during the presentation.
More information: Cesar Ariza: C.J.ArizaRojas@uva.nl