Taxation, Human Capital, and Uncertainty

Jonathan Eaton and Harvey Rosen
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Harvey Rosen: Princeton University

No 497, Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: This paper analyzes the effect of wage and interest taxation on investment in human capital. It is shown that results derived under the assumption that human.capital is a riskless asset fail to obtain when the return on human capi- tal is uncertain. The interaction of the human capital investment decision with savings, consumption and labor-leisure choices are taken into account. An implication of the analysis is that, when the rate of return on human capi- tal is stochastic, efficient taxation requires positive taxation of wage income even when lump-sum taxation is feasible.

JEL-codes: L68 L69 (search for similar items in EconPapers)
Date: 1979-01
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Citations: View citations in EconPapers (1)

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Journal Article: Taxation, Human Capital, and Uncertainty (1980)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:indrel:117

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