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Taxation, Inequality and the Allocation of Talent

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  • Bergman, Malin

    (Dept. of Economics, Stockholm School of Economics)

Abstract

This paper examines the implications of income redistribution on human capital accumulation and income inequality, presenting a model where human capital investment is indivisible and agents differ in economic opportunity as well as intellectual ability. It is shown that the impact of redistribution is ambiguous on the income distribution as well as on human capital accumulation. In particular, while redistributive policy is likely to be successful both in terms of efficiency and equity in low-tax societies, it may be highly detrimental in both respects if the rate of redistribution is already moderate or high.

Suggested Citation

  • Bergman, Malin, 2003. "Taxation, Inequality and the Allocation of Talent," SSE/EFI Working Paper Series in Economics and Finance 522, Stockholm School of Economics, revised 16 Apr 2003.
    • Handle: RePEc:hhs:hastef:0522
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    References listed on IDEAS

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    1. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(4), pages 755-776.
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    3. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-867, June.
    4. Durlauf, Steven N, 1996. "A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
    5. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    6. Fershtman, Chaim & Murphy, Kevin M & Weiss, Yoram, 1996. "Social Status, Education, and Growth," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 108-132, February.
    7. Jose V. Rodriguez Mora & John Hassler, 2000. "Intelligence, Social Mobility, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 888-908, September.
    8. Fernandez, Raquel & Rogerson, Richard, 1998. "Public Education and Income Distribution: A Dynamic Quantitative Evaluation of Education-Finance Reform," American Economic Review, American Economic Association, vol. 88(4), pages 813-833, September.
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    Cited by:

    1. Andrés Solimano, 2006. "The International Mobility of Talent and its Impact on Global Development," WIDER Working Paper Series DP2006-08, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    human capital; talent; efficiency; equity; redistributive taxation;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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