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Education Policies and Taxation without Commitment

Sebastian Findeisen and Dominik Sachs

Scandinavian Journal of Economics, 2018, vol. 120, issue 4, 1075-1099

Abstract: We study the implications of limited commitment on education and tax policies set by benevolent governments. Consistent with real‐world practices, a government can decide to subsidize different levels of education at different rates. A lack of commitment, however, affects the optimal structure of education subsidies. The direction of the effect depends on how labor taxes are designed. With linear labor tax rates and a transfer for redistribution, subsidies become more progressive. By contrast, if the government is only constrained by informational asymmetries when designing taxes, subsidies become more regressive.

Date: 2018
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https://doi.org/10.1111/sjoe.12246

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Working Paper: Education Policies and Taxation without Commitment (2018)
Working Paper: Education Policies and Taxation without Commitment (2014) Downloads
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