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Money or joy: The choice of educational type

Alstadsí¦ter, Annette, Ann-Sofie Kolm () and Birthe Larsen
Authors registered in the RePEc Author Service: Annette Alstadsæter ()

European Journal of Political Economy, 2008, vol. 24, issue 1, 107-122

Abstract: This paper examines the effect of taxes on individuals' educational choices, and thus on the economy's skill composition. A proportional labour tax induces too many workers with high innate ability to choose education that is associated with high consumption and relatively low effort. This increases mismatching of skills and aggregate unemployment. The government could correct this distortion by use of subsidies or differentiated tuition fees. Furthermore, we consider the conditions under which each group of educated workers would support use of nonoptimal taxes and tuition fees.

Date: 2008
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European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung

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