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| Title: | | Efficient tax policy ranks education higher than saving  |
| Authors: | | Richter, Wolfram F. |
| Issue Date: | | 2008 |
| Series/Report no.: | | IZA Discussion Papers 3451 |
| Abstract: | | Assuming a two-period model with endogenous choices of labour, education, and saving, it is shown to be second-best efficient not to distort the choice of education. In general this implies distorting the saving decision. Hence a strict order of policy priority is derived. Efficient tax policy ranks education higher than saving. The result assumes an isoelastic earnings function and holds else for arbitrary utility functions. Isoelasticity of earnings is justified with reference to the empirically well-founded Power Law of Learning. |
| Subjects: | | Endogenous choice of education labour and saving efficient taxation of human and nonhuman capital investment power law of learning |
| JEL: | | H21 |
| Persistent Identifier of the first edition: | | urn:nbn:de:101:1-2008042187 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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