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Teach a man to fish? Education vs. optimal taxation

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  • Eric Stephens

Abstract

In models of redistribution, differences in human capital are often the relevant source of heterogeneity among individuals. Presumably, the distribution of human capital can be manipulated through education spending. This paper examines the use of education as a redistributive tool when there is a non‐linear tax system in place. The results show that taxation, whether under full or asymmetric information, substantially reduces the redistributive role of education spending in maximizing social welfare. This points to a conflict between the equalization of utility and human capital outcomes. Dans les modèles de redistribution, des différences dans le capital humain sont souvent la source pertinente d’hétérogénéité entre individus. Censément, la distribution de capital humain peut être manipulée par le truchement des dépenses en éducation. Ce texte examine l’utilisation de l’éducation en tant qu’instrument de redistribution quand un régime de fiscalité non‐linéaire est en place. Les résultats montrent que la fiscalité, en régime de d’information complète ou asymétrique, réduit substantiellement le rôle de redistribution des dépenses en éducation pour maximiser le bien être social. Voilà qui souligne un conflit entre l’égalisation de l’utilité et les résultats en termes de capital humain.

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  • Eric Stephens, 2012. "Teach a man to fish? Education vs. optimal taxation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1700-1727, November.
    • Handle: RePEc:wly:canjec:v:45:y:2012:i:4:p:1700-1727
    DOI: 10.1111/j.1540-5982.2012.01749.x
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    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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