Abstract

http://ssrn.com/abstract=1324424
 
 

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Taxation and the Allocation of Talent


Benjamin Lockwood


Harvard University, Department of Economics - Littauer Center

Charles Nathanson


Department of Economics, Harvard University: Littauer Center

E. Glen Weyl


Microsoft Research New England; University of Chicago

April 3, 2014


Abstract:     
Income taxation affects the allocation of talent by blunting the material incentives to enter high-paying professions. If, as the literature suggests, the ratio of social to private product is lower in high-paying professions (e.g., finance and law) than in low-paying professions (e.g., teaching and scientific research), progressive taxation is justified even absent a redistributive motive. Optimal taxes are highly sensitive to the size of externalities, which are currently poorly measured. Under our baseline calibration drawn from the literature, the Reagan tax reforms account for a fifth of the increase in pre-tax top income shares and reduce output.

Number of Pages in PDF File: 64

Keywords: career choice, occupational choice, allocation of talent, optimal income taxation, Pigouvian taxation, Just Desserts, Reagan tax reforms

JEL Classification: D62, H21, H24, J24

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Date posted: January 8, 2009 ; Last revised: April 4, 2014

Suggested Citation

Lockwood, Benjamin and Nathanson, Charles and Weyl, E. Glen, Taxation and the Allocation of Talent (April 3, 2014). Available at SSRN: http://ssrn.com/abstract=1324424 or http://dx.doi.org/10.2139/ssrn.1324424

Contact Information

Benjamin Lockwood
Harvard University, Department of Economics - Littauer Center ( email )
1875 Cambridge Street
Cambridge, MA 02138
United States
Charles Nathanson
Department of Economics, Harvard University: Littauer Center ( email )
1875 Cambridge Street
Cambridge, MA 02138
United States
Eric Glen Weyl (Contact Author)
Microsoft Research New England ( email )
One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States
(857) 998-4513 (Phone)
HOME PAGE: http://www.glenweyl.com
University of Chicago ( email )
1126 East 59th Street
Chicago, IL 60637
United States
(773) 702-4862 (Phone)
(773) 702-8490 (Fax)
HOME PAGE: http://www.glenweyl.com
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