Taxation and Human Capital Accumulation

Arizona State University, Department of Economics Working Paper No. 98/3

38 Pages Posted: 3 Dec 1998

See all articles by Lutz Hendricks

Lutz Hendricks

UNC Chapel Hill; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 16, 1998

Abstract

Recent estimates of the effects of tax reforms in the presence of human capital differ greatly. This paper examines which model features and parameter values are critical for the conclusions about the effects of tax changes. I find that the conflicting results of the previous literature are in large part due to implicit assumptions about intergenerational links that differ between life-cycle and infinite horizon models. A model that explicitly incorporates intergenerational links in human and physical capital reveals that neither conventional life-cycle models, which abstract from all intergenerational links, nor infinite horizon models, in which both types of capital are heritable, correctly predict the long-run and transitional effects of tax changes.

JEL Classification: E62, J24, L41

Suggested Citation

Hendricks, Lutz, Taxation and Human Capital Accumulation (July 16, 1998). Arizona State University, Department of Economics Working Paper No. 98/3, Available at SSRN: https://ssrn.com/abstract=138491 or http://dx.doi.org/10.2139/ssrn.138491

Lutz Hendricks (Contact Author)

UNC Chapel Hill ( email )

Chapel Hill, NC 27599
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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