Evaluating the Effect of Tax Deductions on Training

26 Pages Posted: 7 Dec 2000

See all articles by Edwin Leuven

Edwin Leuven

University of Amsterdam - Faculty of Economics and Business (FEB); IZA Institute of Labor Economics

Hessel Oosterbeek

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); Tinbergen Institute Amsterdam (TIA); Institute for the Study of Labor (IZA)

Date Written: October 2000

Abstract

Due to a tax law implemented in 1998, Dutch employers can claim an extra tax deduction when they train employees aged 40 years or older. This causes a discontinuity in a firm's cost of training an employee. This discontinuity is exploited to identify two effects: the effect of the tax deduction on training participation, and the effect of training participation on wages. The estimations show that the training rate of workers just above 40 is about 15-20 percent higher than the training rate of workers just below 40. This difference cannot be attributed to the stimulating effect of the tax deduction on the participation rate of older workers. Moreover, the short-term spill-over effects on workers younger than 40 are so substantial that the net effect of the age-dependent tax deduction is negative.

JEL Classification: H30, J24, J31

Suggested Citation

Leuven, Edwin and Oosterbeek, Hessel, Evaluating the Effect of Tax Deductions on Training (October 2000). Available at SSRN: https://ssrn.com/abstract=246470 or http://dx.doi.org/10.2139/ssrn.246470

Edwin Leuven (Contact Author)

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 5241 (Phone)
+31 20 525 4310 (Fax)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Hessel Oosterbeek

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email )

Roetersstraat 11
Amsterdam
Netherlands
+31 20 525 4242 (Phone)
+31 20 525 5283 (Fax)

HOME PAGE: http://www.fee.uva.nl/scholar/oosterbeek/

Tinbergen Institute Amsterdam (TIA)

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Institute for the Study of Labor (IZA)

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

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