Taxation, Human Capital, and Uncertainty

Optimal Taxation of Human Capital under Uncertainty reconsidered

In a model with ex-ante homogenous households, income risk and a general earnings function, we derive an optimal labor tax rate and optimal education subsidies. It turns out that the distinction of risk-increasing or risk-decreasing education does not have much effect on the optimal tax rate, but is crucial for optimal education subsidies. Moreover, an optimal education policy allows for better...

Taxation and Human Capital Accumulation

How do taxes affect human capital accumulation? This question has been studied extensively in the context of two model classes: overlapping generations (OLG) and infinite horizon (IH) models. These embody very different assumptions about the intergenerational transmission of physical and human capital. OLG models typically abstract from intergenerational linkages, while IH models implicitly ass...

Optimal Capital Income Taxation with Endogenous Human Capital Formation∗

This paper analyzes optimal linear taxes on capital and labor incomes in a life-cycle model of human capital investment, financial savings, and labor supply with heterogenous individuals. A dual income tax with positive marginal tax rates on not only labor but also capital income is optimal. The key function of the tax on capital income is to reduce labor tax distortions on human capital accumu...

Taxation and Capital Spending

On the Taxation of Human Capital

Jones, Department of Managerial Economics and Decision Sciences, Kellogg School, Northwestern University, Evanston, IL, 60208 (email: [email protected]), Manuelli, Department of Economics, University of Wisconsin-Madison, Madison, WI, 53705 (email: [email protected]). We would like to thank NSF for financial support and the Universidad Torcuato DiTella for their hospitality while some of the idea...