Redistribution and Education Subsidies are Siamese Twins

51 Pages Posted: 8 Jan 2002

See all articles by A. Lans Bovenberg

A. Lans Bovenberg

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Bas Jacobs

Erasmus University Rotterdam (EUR); Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2001

Abstract

We develop a model of human capital formation with endogenous labor supply and heterogeneous agents to explore the optimal level of education subsidies along with the optimal progressive schedule of the labor income tax and optimal capital income taxes. Subsidies on education ensure efficiency in human capital accumulation, while taxes on skilled labor help to redistribute income towards the less able. We thus provide a rationale for the widely observed presence of education subsidies. The actually observed tax codes and level of education subsidies suggest that a large part of education subsidies can be justified on these grounds.

Keywords: Human capital, education subsidies, progressive taxation

JEL Classification: H20, H50, I20, J20

Suggested Citation

Bovenberg, A. Lans and Jacobs, Bas, Redistribution and Education Subsidies are Siamese Twins (December 2001). Available at SSRN: https://ssrn.com/abstract=296226

A. Lans Bovenberg (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
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Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute)

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

Bas Jacobs

Erasmus University Rotterdam (EUR) ( email )

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+314081452 (Phone)

HOME PAGE: http://personal.eur.nl/bjacobs

Tinbergen Institute ( email )

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Rotterdam, 3062 PA
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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