Optimal Policy for Investment in Human Capital in the Light of Optimal Tax Theory (Inwestycje w kapital ludzki w swietle optymalnej teorii podatkowej)

Sylwia Radomska ()
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Sylwia Radomska: Faculty of Management, University of Warsaw

Research Reports, 2019, vol. 1, issue 30, 34-42

Abstract: The increasing amount of student loan is becoming a pressing issue for the US economy, as it exceeds 1.4 trillion dollars (or 7.2% of GDP), thus requiring a policy change. This paper presents economic literature on optimal taxation with human capital, which provides foundations for evaluating the long-run effects of taxation and endogenous investment in skills. I review insights from the dynamic models. The literature in the field considers two instruments: turning repayments income-contingent and providing subsidies to education costs. I summarize the results from theoretical and simulation studies. Income-contingent repayment schemes can improve welfare, whereas the effects of education subsidies may be positive only under some assumptions.

Keywords: optimal taxation with human capital; income-contingent repayment; education subsidies (search for similar items in EconPapers)
JEL-codes: H21 H52 I22 J24 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:sgm:resrep:v:1:i:30:y:2019:p:34-42

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