Redistribution and Education Subsidies are Siamese Twins

Lans Bovenberg and Bas Jacobs

No 3099, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a model of human capital formation with endogenous labour supply and heterogeneous agents to explore the optimal level of education subsidies along with the optimal progressive schedule of the labour income tax and optimal capital income taxes. Subsidies on education ensure efficiency in human capital accumulation, while taxes on skilled labour help to redistribute income towards the less able. We thus provide a rationale for the widely observed presence of education subsidies. The actually observed tax codes and level of education subsidies suggest that a large part of education subsidies can be justified on these grounds.

Keywords: Human capital; Education subsidies; Progressive taxation (search for similar items in EconPapers)
JEL-codes: H20 H50 I20 J20 (search for similar items in EconPapers)
Date: 2001-12
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Citations: View citations in EconPapers (44)

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Journal Article: Redistribution and education subsidies are Siamese twins (2005)
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