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Using Tax Deductions to Promote Lifelong Learning: Real and Shifting Responses

Wiljan van den Berge (), Egbert Jongen () and Karen van der Wiel
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Egbert Jongen: CPB Netherlands Bureau for Economic Policy Analysis

CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: Policymakers are concerned about potential underinvestment in lifelong learning. In this paper we study to what extent a tax deduction helps to stimulate post-initial training. Speci fically, we employ a regression kink and regression discontinuity design as jumps in tax bracket rates generate exogenous variation in the effective costs of lifelong learning. Using high quality data on tax returns of the universe of Dutch taxpayers, we nd that the tax deduction has heterogeneous effects on lifelong learning. Low-income singles show no response. For high-income singles we nd an effect of 10% on the probability to use the tax deduction. Furthermore, ignoring shifting of expenses between partners leads to spurious large estimates for primary earners and spurious negative estimates for secondary earners.

JEL-codes: C21 H20 J24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2017-06
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