Optimal redistribution and education signaling

Spencer Bastani, Tomer Blumkin () and Luca Micheletto ()
Additional contact information
Tomer Blumkin: Department of Economics, Ben Gurion University of the Negev
Luca Micheletto: Department of Law, University of Milan, and Dondena Centre for Research on Social Dynamics and Public Policy, Bocconi University

No 2024:8, Working Paper Series from IFAU - Institute for Evaluation of Labour Market and Education Policy

Abstract: This paper studies optimal taxation of income and education when employers cannot observe workers’ productivity and workers signal their productivity to firms by choosing both quantity and quality of education. We characterize constrained efficient allocations and derive conditions under which there is predistribution, i.e., redistribution through wage compression. Implementation through income and education dependent taxes is discussed, as well as education mandates. A key insight is that achieving predistribution requires complementing the income tax with additional policy instruments that regulate the flow of information in the labor market and prevent high skilled individuals from separating themselves from their low-skilled counterparts.

Keywords: nonlinear taxation; education; asymmetric information; human capital; predistribution (search for similar items in EconPapers)
JEL-codes: D82 H21 H52 J31 (search for similar items in EconPapers)
Pages: 91 pages
Date: 2024-03-13
New Economics Papers: this item is included in nep-lma, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Optimal redistribution and education signaling (2024)
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