Redistributive Taxation, Inequality, and Intergenerational Mobility

Andrea Schneider

No 68/2007, Working Paper from Helmut Schmidt University, Hamburg

Abstract: Education decisions determine a great part of future income. This paper argues that if education is financed by parents' current income a lump-sum tax reduces inequality if all parents have strict investment incentives. However, if some parents are indifferent there is a possible decrease in the wage gap via a contrary indirect tax effect which drops the returns of schooling. Under strict incentives social mobility is not affected, but it increases if skilled parents have weak incentives and decreases if unskilled parents are indifferent in their investment decision.

Keywords: Intergenerational mobility; Inequality; Redistribution; Lump- sum tax (search for similar items in EconPapers)
JEL-codes: D31 D91 H23 H31 I21 J24 J62 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2007-10
New Economics Papers: this item is included in nep-lab and nep-pub
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