The Impact of Taxes and Transfers on Skill Premium
Shuhei Takahashi and
No 976, KIER Working Papers from Kyoto University, Institute of Economic Research
The level of wage inequality has varied across advanced industrial countries. One of the main reasons has been a significant difference in the skill wage premium. This study analyzes the impact of taxes and transfers on the skill wage premium and social welfare in the context of a heterogeneous-agents incomplete-markets model, in which the population consists of skilled workers and unskilled workers, and the production technology exhibits capital-skill complementarity. The analysis indicates that a significant fraction of the difference in the skill wage premium between the United States and Japan can be accounted for by differences in the tax system.
Keywords: Skill premium; capital-skill complementarity; incomplete markets; capital income taxation; composition effect (search for similar items in EconPapers)
JEL-codes: E13 E24 E62 H24 J31 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:976
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