Income Taxation, Tuition Subsidies, and Choice of Occupation: Implications for Production Efficiency

Geir Haakon Bjertnæs

No 1627, CESifo Working Paper Series from CESifo

Abstract: The desirability for production efficiency is re-examined in this study, where agents choose occupation based on lifetime income net of tuition costs. Efficient revenue raising implies that the government should trade off efficiency in production for efficiency in intertemporal consumption, as capital income is taxed in optimum. The subsequent wage difference between high- and low-skilled occupations is increased compared to a production efficient outcome, which is in contrast to previous results in the literature.

Keywords: optimal income taxation; subsidies for tuition; skill formation; production efficiency (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-int, nep-lab and nep-pub
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