Education Policies and Taxation without Commitment

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URL:	https://ub-madoc.bib.uni-mannheim.de/36622
URN:	urn:nbn:de:bsz:180-madoc-366223
Document Type:	Working paper
Year of publication:	2014
The title of a journal, publication series:	Working Paper Series
Volume:	14-16
Place of publication:	Mannheim
Publication language:	English
Institution:	School of Law and Economics > VWL, Makro- u. Entwicklungsökonomie (Juniorprofessur) (Findeisen 2014-2019)
MADOC publication series:	Department of Economics > Working Paper Series
Subject:	330 Economics
Classification:	JEL: H21 , H23 , I21,
Keywords (English):	Education Policies , Time-Inconsistency , Taxation , Inequality
Abstract:	We study the implications of limited commitment on education and tax policies chosen by benevolent governments. Individual wages are determined by both innate abilities and education levels. Consistent with real world practices, the government can decide to subsidize different levels of education at different rates. Deviations from full commitment tend to make education policies more progressive, increasing the education subsidy for initially low skilled agents and decreasing it for initially high skilled agents. We provide suggestive cross-country correlations for this mechanism.