Research Papers in Economics, Department of Economics, Stockholm University
Camilo von Greiff
Effects of Redistribution Policies - Who Gains and Who Loses?
Abstract: The paper combines optimal taxation theory with human
capital theory and develops a theoretical model with endogenous wages and
education decision, in which redistributive policy experiments are carried
out and assessed. It is argued that general equilibrium effects of labor
income taxation on wages may counteract fiscal redistribution. It is also
shown that education subsidies may only benefit skilled workers, suggesting
that this subsidy can merely be viewed as a redistribution from unskilled
to skilled individuals. Therefore, optimal policy involves a lump-sum
education tax in the form of a negative education subsidy.
Keywords: Income Redistribution; Education Subsidies; (follow links to similar papers)
JEL-Codes: H21; H23; (follow links to similar papers)
33 pages, June 27, 2007
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