Author: Been-lon ChenPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Optimal Taxation in the Life Cycle with Human Capital Investment
Author: Been-lon ChenRisk-Taking and Optimal Taxation with Nontradable Human Capital
Author: Zuliu HuPublisher: International Monetary Fund
ISBN: 1451947429
Category : Business & Economics
Languages : en
Pages : 22
Book Description
What are the effects of taxation on individual/entrepreneurs’ risk-taking behavior? This paper re-examines this old question in a continuous time life-cycle model. We demonstrate that the stream of uncertain income from human capital has systematic effects on demand for the risky physical capital asset. If labor supply is inelastic and real wages are known with certainty, then a labor income tax will reduce holdings of the risky physical asset. However, if there are random fluctuations in labor income, then the effect depends on the nature of interaction between wage risk and investment income risk. A labor income tax may actually raise demand for the risky capital asset if human capital risk and physical capital risk are positively correlated. The idiosyncratic risk and nontradability of human capital also have implications for optimal taxation. When the insurance and disincentive effects are jointly taken into account, a Pareto efficient tax structure implies a strictly positive tax rate.
Optimal Taxation and Human Capital Policies Over the Life Cycle
Author: Stefanie StantchevaPublisher:
ISBN:
Category : Human capital
Languages : en
Pages : 53
Book Description
This paper derives optimal income tax and human capital policies in a dynamic life cycle model of labor supply and risky human capital formation. The wage is a function of both stochastic, persistent, and exogenous "ability'' and endogenous human capital. Human capital is acquired throughout life through monetary expenses. The government faces asymmetric information regarding the initial ability of agents and the lifetime evolution of ability, as well as the labor supply. The optimal subsidy on human capital expenses is determined by three considerations: counterbalancing distortions to human capital investment from the taxation of wage and capital income, encouraging labor supply, and providing insurance against adverse draws from the productivity distribution. When the wage elasticity with respect to ability is increasing in human capital, the optimal subsidy involves less than full deductibility of human capital expenses on the tax base, and falls with age. I consider two ways to implement the optimum: income contingent loans, and a tax scheme that allows for a deferred deductibility of human capital expenses. Numerical results are presented that suggest that full dynamic risk-adjusted deductibility of expenses might be close to optimal, and that simple linear age-dependent policies can achieve most of the welfare gain from the second best.
Optimal Taxation of Risky Human Capital
Author: Bas JacobsPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
In a two-period life-cycle model with ex ante homogeneous households, earnings risk, and a general earnings function, we derive the optimal linear labor tax rate and optimal linear education subsidies. The optimal income tax trades off social insurance against incentives to work. Education subsidies are not used for social insurance, but they are only targeted at offsetting the distortions of the labor tax and internalizing a fiscal externality. Both optimal education subsidies and tax rates increase if labor and education are more complementary, because education subsidies indirectly lower labor tax distortions by stimulating labor supply. Optimal education subsidies (taxes) also correct non-tax distortions arising from missing insurance markets. Education subsidies internalize a positive (negative) fiscal externality if there is underinvestment (overinvestment) in education because of risk. Education policy unambiguously allows for more social insurance if education is a risky activity. However, if education hedges against labor-market risk, optimal tax rates could be lower than in the case without education subsidies.
Taxation, Human Capital, and Uncertainty
Author: Jonathan EatonPublisher:
ISBN:
Category : Human capital
Languages : en
Pages : 56
Book Description
Learning and (or) Doing
Author: Stefanie StantchevaPublisher:
ISBN:
Category : Economics
Languages : en
Pages : 37
Book Description
This paper considers a dynamic taxation problem when agents can allocate their time between working and investing in their human capital. Time investment in human capital, or "training," increases the wage and can interact with an agent's intrinsic, exogenous, and stochastic earnings ability. It also interacts with both current and future labor supply and there can be either "learning-and-doing" (when labor and training are complements, like for on-the-job training) or "learning-or-doing" (when labor and training are substitutes, like for college). Agents' abilities and labor supply are private information to them, which leads to a dynamic mechanism design problem with incentive compatibility constraints. At the optimum, the subsidy on training time is set so as to balance the total labor supply effect of the subsidy and its distributional consequences. In a one-period version of the model, particularly simple relations arise at the optimum between the labor wedge and the training wedge that can also be used to test for the Pareto efficiency of existing tax and subsidy systems. In the limit case of learning-by-doing (when training is a direct by-product of labor) or in the case in which agents who are more able at work are also more able at training, there are important modifications to the labor wedge.
Risky Human Capital and Deferred Capital Income Taxation
Author: Borys GrochulskiPublisher:
ISBN:
Category : Deferred tax
Languages : en
Pages : 65
Book Description
Optimal Taxation with Human Capital
Author: Claudia HermelingPublisher:
ISBN: 9783866241664
Category :
Languages : en
Pages : 148
Book Description
Author: 
Author: William B. Peterman