Tax Policy and Returns to Education

Alison Lee Booth () and Melvyn B. Coles

No 591, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Social Sciences, Australian National University

Abstract: This paper considers how asymmetric tax treatment, where labour market earnings are taxed but household production is untaxed, aspects educational choice and labour supply. We show that taxes on labour market earnings can generate a large (non-marginal) switch to home production and the ensuing deadweight losses are large. Using a cross-country panel, we find that gender differences in labour supply responses to tax policy can explain differences in aggregate labour supply and years of education across countries.

Keywords: Increasing returns; tax policy; gender; labour supply; education (search for similar items in EconPapers)
JEL-codes: H24 H3 J22 J24 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu, nep-hrm, nep-lab and nep-pub
Date: 2008-12
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Persistent link: http://EconPapers.repec.org/RePEc:auu:dpaper:591

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