Tax Policy, Investments in Human and Physical Capital, and Productivity

27 Pages Posted: 5 Jul 2004 Last revised: 27 Aug 2010

See all articles by Marc Nerlove

Marc Nerlove

University of Maryland

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Efraim Sadka

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Robert K. von Weizsäcker

Technische Universität München (TUM) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 1990

Abstract

This paper analyzes the implications of tax policy for the accumulation of human and physical capital and for the overall productivity level of the economy. A comprehensive income tax, applying to both labour income and capital income. discriminates against investments in human capital relative to investments in physical capital. Hence. it has an adverse impact on human capital accumulation. Taking into account a positive external effect of investments in human capital on overall productivity, the adverse effect of income taxation on human capital investments is significantly magnified.

Suggested Citation

Nerlove, Marc L. and Razin, Assaf and Sadka, Efraim and von Weizsäcker, Robert K., Tax Policy, Investments in Human and Physical Capital, and Productivity (December 1990). NBER Working Paper No. w3531. Available at SSRN: https://ssrn.com/abstract=226850

Marc L. Nerlove (Contact Author)

University of Maryland ( email )

College Park
College Park, MD 20742
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301-405-1388 (Phone)

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 7303 (Phone)
+972 3 640 9908 (Fax)

National Bureau of Economic Research (NBER) ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Efraim Sadka

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 9712 (Phone)
+972 3 642 8074 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Robert K. Von Weizsäcker

Technische Universität München (TUM) - Department of Economics ( email )

Munich
Germany

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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