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Education and Taxation Policies in the Presence of Countervailing Incentives
Author(s) -
KRAUSE ALAN
Publication year - 2009
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2008.00695.x
Subject(s) - incentive , economics , redistribution (election) , productivity , public economics , government (linguistics) , preference , education policy , redistribution of income and wealth , microeconomics , macroeconomics , higher education , economic growth , public good , linguistics , philosophy , politics , political science , law
I examine income taxation and education policy when the government cannot observe individual productivity, and there exist conflicting incentives for individuals to understate and overstate their productivity. In this setting I identify four possible equilibria, and discuss the corresponding taxation/education policy mix. I show that no general restrictions on optimal taxation and education policy emerge in this environment, but each equilibrium and corresponding policy package can be associated with a country on the basis of its relative income and preference for redistribution.