Taxes,Tuition Fees,and Education for Pleasure |
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Authors: | NIKOLAJ MALCHOW‐MØLLER SØREN BO NIELSEN JAN ROSE SKAKSEN |
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Institution: | 1. University of Southern Denmark and Centre for Economic and Business Research (CEBR);2. Copenhagen Business School, CEPR, and SESifo;3. Copenhagen Business School, IZA, and CEBR |
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Abstract: | The fact that education provides both a productive and a consumptive (nonproductive) return has important and, in some cases, dramatic implications for optimal taxes and tuition fees. Using a simple model, we show that when the consumption share in education is endogenous and tuition fees are unconstrained, the optimal tax/fee system involves regressive income taxes and high tuition fees. A progressive labor income tax system may, on the other hand, be a second‐best response to politically constrained, low tuition fees. Finally, the existence of individuals with different abilities will also move the optimal income tax system toward progressivity. |
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