Optimal progressive taxation in a model with endogenous skill supply
Stylianos Asimakopoulos,
Jim Malley and
Konstantinos Angelopoulos
No 2014/12, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)
Abstract:
This paper examines quantitatively the extent of progressivity or regressivity of optimal labour income taxation in a model with skill heterogeneity, endogenous skill acquisition and a production sector with capital-skill complementarity. We find that wage inequality driven by the resource requirements of skill-creation implies progressive labour income taxation in the steady-state as well as along the transition path from the exogenous to optimal policy steady-state. In particular, in the steady state, skilled labour income is taxed about 40% more than unskilled labour income. We further find that these results are explained by a lower work time elasticity for skilled versus unskilled labour which results from the introduction of the skill acquisition technology.
Keywords: optimal progressive taxation; skill premium; allocative efficiency (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-dge, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://www.nottingham.ac.uk/cfcm/documents/papers/cfcm-2014-12.pdf (application/pdf)
Related works:
Working Paper: Optimal progressive taxation in a model with endogenous skill supply (2014)
Working Paper: Optimal progressive taxation in a model with endogenous skill supply (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:14/12
Access Statistics for this paper
More papers in Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Hilary Hughes ().