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An Income Tax Increase to Fund Higher Education: A CGE Analysis for Chile

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  • Cristian Mardones

Abstract

An increase in income taxes to fund education was one of the demands made by the social movements that emerged in Chile in 2011. Currently, the Chilean Congress is enacting a tax reform to raise money for higher education. This study aims to show the dynamic effects on the general equilibrium of the Chilean economy under two alternative approaches: a subsidy to lower the price of higher education (public and private), and greater spending on public higher education to reduce household payments for education. The social accounting matrix (SAM) used to calibrate the computable general equilibrium (CGE) model has 38 economic sectors, including the production structure of private education and public education. The study mainly concludes that a subsidy policy has significant advantages over increasing higher public education spending, regarding its effects on variables such as GDP, investment, and household incomes, while both policies have a similar effect on poverty and income distribution.

Suggested Citation

  • Cristian Mardones, 2015. "An Income Tax Increase to Fund Higher Education: A CGE Analysis for Chile," Economic Systems Research, Taylor & Francis Journals, vol. 27(3), pages 324-344, September.
    • Handle: RePEc:taf:ecsysr:v:27:y:2015:i:3:p:324-344
    DOI: 10.1080/09535314.2015.1030359
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    Cited by:

    1. Mohammed, Zuhal & Siddig, Khalid & Grethe, Harald, 2016. "Incorporating vocational training systems in CGE models," Conference papers 332762, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Katerina GAWTHORPE, 2020. "Heterogeneous VAT taxation in the Czech economy," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 11, pages 132-159, December.
    3. Vanesa Jorda & Jose M. Alonso, 2020. "What works to mitigate and reduce relative (and absolute) inequality?: A systematic review," WIDER Working Paper Series wp-2020-152, World Institute for Development Economic Research (UNU-WIDER).

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