Education and optimal dynamic taxation: The role of income-contingent student loans.

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Autor/Urheber	Findeisen, Sebastian; Sachs, Dominik
Titel	Education and optimal dynamic taxation: The role of income-contingent student loans.
Quelle	(2012) PDF als Volltext kostenfreie Datei
Sprache	englisch
Dokumenttyp	online; Monographie
DOI	10.5167/uzh-51544
Schlagwörter	Department of Economics; 330 Economics; Optimal dynamic taxation; education; implementation; Steuerpolitik; Bildung; Bildungsinvestition
Abstract	We study Pareto optimal tax and education policies when human capital upon labor market entry is endogenous and individuals face wage uncertainty. Though optimal labor distortions are history-dependent, i.e. depend on income and education, simple policy instruments can yield the desired distortions: a single nonlinear labor income tax schedule combined with income-contingent loans. To take themodel to the (US) data, we simplify the model to a binary education decision (graduating from college or not). We find that for lowand intermediate incomes the labor supply decision of college graduates should be distorted more heavily than for individuals without a college degree. As a consequence, the optimal student loan repayment schedule increases in income for this range. This result holds along the Pareto frontier. We compare the second best to a situation where loan repayment is restricted to be independent from income and find significant welfare gains.
Anmerkungen	doi:10.5167/uzh-51544; urn:issn:1664-7041; Findeisen, Sebastian; Sachs, Dominik (2012). Education and optimal dynamic taxation: The role of income-contingent student loans. Working paper series / Department of Economics 40, University of Zurich.
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