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Optimal taxation in the Uzawa-Lucas Model with externality in human capital

Arantza Gorostiaga (), Jana Hromcová () and Miguel Ángel López García ()
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Miguel Ángel López García: Dpt. Economia Aplicada

Authors registered in the RePEc Author Service: Miguel-Angel Lopez-Garcia ()

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

Abstract: We show that in the Uzawa-Lucas model with externality in human capital with agents that value both consumption and leisure, the government pursuing the first best can achieve its goal by subsidizing the foregone earnings while studying. The subsidy should be financed by a schooling fee. We obtain that countries with similar initial conditions may issue different fees because multiple equilibria can arise for empirically plausible values of parameters. This result differs from the one obtained in ananalogous economy where agents only value consumption.

Keywords: optimal policy; two-sector model; endogenous growth; indeterminacy. (search for similar items in EconPapers)
JEL-codes: O41 E62 H31 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2011-09
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-pub
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http://www.ivie.es/downloads/docs/wpasad/wpasad-2011-19.pdf Fisrt version / Primera version, 2011 (application/pdf)

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Journal Article: Optimal taxation in the Uzawa–Lucas model with externality in human capital (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2011-19

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