Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5068463 | European Journal of Political Economy | 2008 | 16 Pages |
Abstract
This paper examines the effect of taxes on individuals' educational choices, and thus on the economy's skill composition. A proportional labour tax induces too many workers with high innate ability to choose education that is associated with high consumption and relatively low effort. This increases mismatching of skills and aggregate unemployment. The government could correct this distortion by use of subsidies or differentiated tuition fees. Furthermore, we consider the conditions under which each group of educated workers would support use of nonoptimal taxes and tuition fees.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Annette Alstadsæter, Ann-Sofie Kolm, Birthe Larsen,