Tax progression and human capital in imperfect labour markets
Recent contributions to the theory of taxation argue that tax progression raises welfare and employment in the presence of labour market imperfections. This literature takes the endowment of workers with human capital as given. The present paper analyses the effects of tax progression in a model with endogenous human capital formation. We show that the effect of tax progression on human capital investment depends on the deductibility of the cost of human capital formation. With full deductibility, tax progression raises employment and welfare. With incomplete deductibility, in contrast, the effect of tax progression on employment and welfare may be negative.
Year of publication: |
2001
|
---|---|
Authors: | Fuest, Clemens ; Huber, Bernd |
Institutions: | Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München |
Saved in:
Saved in favorites
Similar items by person
-
Is tax progression really good for employment? A model with endogenous hours of work
Fuest, Clemens, (2000)
-
Can regional policy in a federation improve economic efficiency?
Fuest, Clemens, (2006)
-
Capital mobility and tax competition
Fuest, Clemens, (2005)
- More ...