Federation's Alternative Tax Constitutions and Risky Education

Poutvaara, Panu

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URL: http://ub-madoc.bib.uni-mannheim.de/601
URN: urn:nbn:de:bsz:180-madoc-6010
Document Type: Working paper
Year of publication: 1999
The title of a journal, publication series: None
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H21 H87 I22 ,
Subject headings (SWD): Bildung , Ausbildung , Lohn , Steuer , Föderalismus
Abstract: We analyze a two-period model where risk-averse students divide their time between risky education, leisure and work. The educated can migrate. Wage-tax financed transfer to students acts as an insurance, and increases both investment in education and demand for leisure. We derive sufficient conditions for tax competition to lead to too low wage tax rates. We suggest, that the educated should pay their wage taxes to the region which has financed their education, and would benefit also the owners of the complementary factor.
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