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Age†Dependent Taxes With Endogenous Human Capital Formation

Author

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  • Carlos E. da Costa
  • Marcelo R. Santos

Abstract

We assess the gains attained by the introduction of age†dependent labor income taxes in an overlapping generations economy where individuals live a meaningful life cycle and endogenously accumulate human capital. The model is sufficiently rich to isolate the role of general equilibrium effects, credit market imperfections, and different forms of human capital accumulation. The large welfare gains we obtain cannot be attained without age dependence, nor can they be attained with age†dependent taxes if progressivity of labor income taxes and capital income tax rates are not suitably adjusted to profit from the complementarity of these instruments.

Suggested Citation

  • Carlos E. da Costa & Marcelo R. Santos, 2018. "Age†Dependent Taxes With Endogenous Human Capital Formation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(2), pages 785-823, May.
    • Handle: RePEc:wly:iecrev:v:59:y:2018:i:2:p:785-823
    DOI: 10.1111/iere.12288
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    Cited by:

    1. Keane, Michael P., 2022. "Recent research on labor supply: Implications for tax and transfer policy," Labour Economics, Elsevier, vol. 77(C).
    2. Blandin, Adam & Peterman, William B., 2019. "Taxing capital? The importance of how human capital is accumulated," European Economic Review, Elsevier, vol. 119(C), pages 482-508.

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