The effects of the tax system on education decisions and welfare

Lari Viianto ()

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: I study the effects of a linear tax schedule on educational decisions and welfare in a two period model where the educational decision is discrete and its return is uncertain. I find that a linear tax rate has a positive effect on the number of agents who decide to acquire higher education. This effect becomes negative when the revenue is returned as a lump-sum transfer. The government can influence the education level to some extent using a linear tax schedule. However this policy always has a negative welfare effect. I also find that if there is a revenue need a welfare maximizing government will prefer a linear tax to a lump-sum tax.

Keywords: Education; taxation; welfare. (search for similar items in EconPapers)
JEL-codes: H20 H31 I20 I30 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010-03
New Economics Papers: this item is included in nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2010-11

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