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Title:Efficient tax policy ranks education higher than saving PDF Logo
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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