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Tax policy and returns to education

Author

Listed:
  • Booth, A.L.
  • Coles, M.G.

Abstract

This paper considers how asymmetric tax treatment, where labour market earnings are taxed but household production is untaxed, affects educational choice and labour supply. We show that taxes on labour market earnings can generate a large (non-marginal) switch to home production and the ensuing deadweight losses are large. Using a cross-country panel, we find that gender differences in labour supply responses to tax policy can explain differences in aggregate labour supply and years of education across countries.

Suggested Citation

  • Booth, A.L. & Coles, M.G., 2010. "Tax policy and returns to education," Labour Economics, Elsevier, vol. 17(1), pages 291-301, January.
    • Handle: RePEc:eee:labeco:v:17:y:2010:i:1:p:291-301
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    References listed on IDEAS

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    8. Lans Bovenberg, A. & Jacobs, Bas, 2005. "Redistribution and education subsidies are Siamese twins," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2005-2035, December.
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    11. Patricia F. Apps & Ray Rees, 1999. "Individual versus Joint Taxation in Models with Household Production," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 393-403, April.
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    13. Alberto Alesina & Andrea Ichino & Loukas Karabarbounis, 2011. "Gender-Based Taxation and the Division of Family Chores," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 1-40, May.
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    15. Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-350, April.
    16. Booth, Alison L. & Coles, Melvyn, 2007. "A microfoundation for increasing returns in human capital accumulation and the under-participation trap," European Economic Review, Elsevier, vol. 51(7), pages 1661-1681, October.
    17. Patricia Apps, 2003. "Gender, Time Use and Models of the Household," CEPR Discussion Papers 464, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    18. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66(4), pages 281-281.
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    21. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
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    25. Rios-Rull, Jose-Victor, 1993. "Working in the Market, Working at Home, and the Acquisition of Skills: A General-Equilibrium Approach," American Economic Review, American Economic Association, vol. 83(4), pages 893-907, September.
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    Citations

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    Cited by:

    1. Helmuth Cremer & Pierre Pestieau & Maria Racionero, 2011. "Unequal wages for equal utilities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(4), pages 383-398, August.
    2. Alison Booth & Jan Ours, 2013. "Part-time jobs: what women want?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(1), pages 263-283, January.
    3. Esfahanian , Homa, 2015. "Productivity Investment and Labor Force Participation in Search Equilibrium," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 10(1), pages 23-63, January.
    4. Margit Schratzenstaller-Altzinger, 2012. "Gender-Budgeting im Steuersystem," WIFO Studies, WIFO, number 45759.
    5. Frédéric SALLADARRÉ & Stéphane HLAIMI, 2014. "Women and part-time work in Europe," International Labour Review, International Labour Organization, vol. 153(2), pages 293-310, June.
    6. Margit Schratzenstaller-Altzinger & Fanny Dellinger, 2017. "Genderdifferenzierte Lenkungswirkungen des Abgabensystems," WIFO Studies, WIFO, number 60797.
    7. Wei-Bin Zhang, 2016. "Impact of Education Subsidies and Taxation on Wealth and Human Capital Accumulation," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 2(3), pages 222-247.
    8. Zhang Wei-Bin, 2012. "Education and Human Capital Accumulation in a Two -Sector Growth Model with Elastic Labor Supply," Scientific Annals of Economics and Business, Sciendo, vol. 59(1), pages 289-309, July.
    9. Margit Schratzenstaller-Altzinger & Fanny Dellinger, 2018. "Genderdifferenzierte Lenkungswirkungen des Abgabensystems auf das Arbeitsangebot," WIFO Monatsberichte (monthly reports), WIFO, vol. 91(2), pages 105-120, February.

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    More about this item

    Keywords

    Increasing returns Tax policy Gender Labour supply Education;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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