Whither the Progressive Tax?

CIRPEE Working Paper 13-40

45 Pages Posted: 6 Nov 2013

See all articles by Sylvain Dessy

Sylvain Dessy

Université Laval - Département d'Économique

Safa Ragued

Université Laval; Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

Date Written: November 5, 2013

Abstract

The progressive wage tax is the instrument commonly used by democracies to fund public expenditures. Yet it still divides opinions about its impact on skill formation. We develop a general equilibrium model to analyze this impact, in the context of uncertain return on higher education. We show that the quantitative impact on skill formation of switching from the flat to the progressive tax varies with the level of efficiency with which higher education imparts graduates with suitable skills. This impact is negative when the level of efficiency of higher education is low and positive when it is high.

Keywords: Tax progressivity, higher education, skilled information, capital inflows, general equilibrium

JEL Classification: F21, F22, H20, J60

Suggested Citation

Dessy, Sylvain and Ragued, Safa, Whither the Progressive Tax? (November 5, 2013). CIRPEE Working Paper 13-40. Available at SSRN: https://ssrn.com/abstract=2350272 or http://dx.doi.org/10.2139/ssrn.2350272

Sylvain Dessy (Contact Author)

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada

Safa Ragued

Université Laval ( email )

Pavillon J-A. DeSeve
Quebec, Quebec G1V 0A6
Canada

Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

Pavillon De Sève
Quebec, Quebec G1V 0A6
Canada

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