How Many Educated Workers for Your Economy? European Targets, Optimal Public Spending, and Labor Market Impact

Isabelle Lebon and Therese Rebiere

No 8854, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper studies optimal taxation schemes for education in a search-matching model where the labor market is divided between a high-skill and a low-skill sector. Two public policy targets – maximizing the global employment level and optimizing the social surplus – are studied according to three different public taxation strategies. We calibrate our model using evidence from fourteen European countries, and compare our results with the target from the Europe 2020 Agenda for achievement in higher education. We show that, with current labor market characteristics, the target set by governments seems compatible with the social surplus maximization objective in some countries, while being too high for other countries. For all countries, maximizing employment would imply higher educational spending than that required for the social surplus to reach its maximum.

Keywords: optimal taxation; matching model; job search; educational policy (search for similar items in EconPapers)
JEL-codes: H21 H52 J21 J64 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2015-02
New Economics Papers: this item is included in nep-eur, nep-lab, nep-lma and nep-pbe
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Published - published in: Portuguese Economic Journal, 2018, 17 (1), 1 - 44

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Related works:
Journal Article: How many educated workers for your economy? European targets, optimal public spending, and labor market impact (2018)
Working Paper: How many educated workers for your economy? European targets, optimal public spending, and labor market impact (2018)
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