How Do Taxes Affect Human Capital? The Role of Intergenerational Mobility PDF Download
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Author: Lutz Hendricks
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Existing studies of the effects of taxation on human capital accumulation are based on models with extreme intergenerational mobility properties. One strand of the literature uses life-cycle models, in which intergenerational mobility is perfect. Another strand relies on models of infinitely lived dynasties, in which intergenerational persistence is perfect. Hendricks (1999a) shows that the predicted tax effects differ in important ways across the two model classes, in large part due to the extreme mobility properties implied by standard infinite horizon and life-cycle models. It is therefore important to study the effects of taxes in environments with realistic intergenerational mobility properties. To this end, this paper develops an overlapping generations model of taxation and human capital accumulation which matches features of the intergenerational transmission of earnings and education estimated from a panel of U.S. workers. The main finding is that abstracting from the intergenerational transmission of human capital, as is typically done in life-cycle models, has little impact on the predicted effects of tax reforms. In contrast, models with extreme degrees of intergenerational persistence, as implicit in infinite horizon models, generate very different outcomes. This finding cautions against the use of infinite horizon models of human capital accumulation.
Author: Lutz Hendricks
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Existing studies of the effects of taxation on human capital accumulation are based on models with extreme intergenerational mobility properties. One strand of the literature uses life-cycle models, in which intergenerational mobility is perfect. Another strand relies on models of infinitely lived dynasties, in which intergenerational persistence is perfect. Hendricks (1999a) shows that the predicted tax effects differ in important ways across the two model classes, in large part due to the extreme mobility properties implied by standard infinite horizon and life-cycle models. It is therefore important to study the effects of taxes in environments with realistic intergenerational mobility properties. To this end, this paper develops an overlapping generations model of taxation and human capital accumulation which matches features of the intergenerational transmission of earnings and education estimated from a panel of U.S. workers. The main finding is that abstracting from the intergenerational transmission of human capital, as is typically done in life-cycle models, has little impact on the predicted effects of tax reforms. In contrast, models with extreme degrees of intergenerational persistence, as implicit in infinite horizon models, generate very different outcomes. This finding cautions against the use of infinite horizon models of human capital accumulation.
Author: Dirk Van De Gaer
Publisher:
ISBN:
Category :
Languages : en
Pages : 64
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Book Description
Author: Mareike Schad
Publisher: Springer
ISBN: 3658104651
Category : Political Science
Languages : en
Pages : 174
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Book Description
Mareike Schad examines how redistributive policy measures influence intergenerational income mobility, taking into account various facets of the parent-child connection. In the first part, the author investigates the impact of education and education policy on income mobility both theoretically and empirically. The second part addresses individual beliefs regarding the determinants of personal economic success and their effect on income mobility within a society.
Author: C. Simon Fan
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper extends an intergenerational context to the prospect of upward mobility hypothesis, showing that the poor majority in democracies may not support massive redistribution for the sake of their children's educational attainment and upward mobility. We develop an overlapping generations model in which human capital formation depends on individual effort and educational resources. Parents vote on redistributive policies under majority rule by considering the disincentive effects of high tax rates on children's study efforts. We characterize the stationary Markov perfect equilibrium in which children respond negatively to the extent of redistribution, and parental altruism discourages poor voters from expropriating the rich. Under private education, a tax rate is only credible above a certain threshold, and children's efforts and their parental inputs are complements in the steady state. Under public education, a credible policy embodies a moderate income tax combined with a small educational fund. Under both school systems, the optimal credible tax increases with wage inequality and decreases as parental altruism becomes stronger.
Author: Assaf Razin
Publisher:
ISBN:
Category : Capital movements
Languages : en
Pages : 42
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Book Description
We consider the role of capital mobility and international taxation. In explaining the observed diversity in long-term growth rates. Our major finding is that, under capital mobility, international differences in taxes will not matter for total growth differentials. Policy differences have a role to play in per capita growth differentials, however, when they lead to a divergence in the after-tax rates of return on capital across countries, as when the residence principle is adopted universally. When this is the case, how tax differences affect the growth rates of population and human capital will depend on the relative preference of the individual household towards these two engines of growth. Optimal tax policies are found to be growth-equalizing with and without policy coordination.
Author: Lutz Hendricks
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
How do taxes affect human capital accumulation? This question has been studied extensively in the context of two model classes: overlapping generations (OLG) and infinite horizon (IH) models. These embody very different assumptions about the intergenerational transmission of physical and human capital. OLG models typically abstract from intergenerational linkages, while IH models implicitly assume that new agents inherit human and physical capital from their parents. This paper investigates how such differences in intercohort persistence affect the responsiveness of human capital to taxation. A model is developed that nests OLG and IH models as special cases. Analytical expressions for the steady state tax elasticities of human capital are derived for versions of the model with varying degrees of persistence. The main finding is that higher persistence increases the responsiveness of human capital to both wage and capital income taxes. As a result, IH models generate larger tax elasticities than do OLG models with incomplete persistence, even if cohorts are altruistically linked. In a calibrated version of the model, moving from no persistence to complete persistence increases the tax elasticity of human capital by a factor between two and three.
Author: Omayma Elsheniti
Publisher:
ISBN:
Category : Educational attainment
Languages : en
Pages : 126
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Author: Song Han
Publisher:
ISBN:
Category : Ability, Distribution of
Languages : en
Pages : 42
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Book Description
Some of the important implications of the parental investment model of intergenerational mobility have been derived under the assumption that parental income is the main source of heterogeneity. We explicitly model the variability and inheritability of innate' earnings ability and the variability of tastes, showing how they affect observed degrees of intergenerational consumption and earnings mobility. Heterogeneity increases the difficulty of detecting the existence of borrowing constrained families. Conversely, the presence of heterogeneity means that economic and linear statistical models of inheritance generate similar intergenerational data on consumption and earnings. In this sense, our findings offer some support for Goldberger's (1989) criticism of human capital models of inheritance. Finally, we suggest that any cross-country differences in intergenerational earnings mobility are more readily interpreted according to the heterogeneity of inherited ability, rather than optimal family responses to country-specific institutions for accumulating human capital
Author: Seunghee Lee (Economist)
Publisher:
ISBN:
Category : Equality
Languages : en
Pages : 0
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As the interest in Economics on inequality has exploded, intergenerational mobility is one of the fundamental areas concerning inequality since it is related to many normative questions such as equal opportunity and fairness. Despite its importance, research on measuring intergenerational mobility has received relatively little attention. The dominant approach is still the scalar-based regression approach, which employs a regression of some statistics of offspring on some statistics of parents. In connection with this issue, this dissertation introduces a novel measure for intergenerational mobility based on modern economic theory and empirically analyzes intergenerational mobility in the U.S. and Korea.The first chapter analyzes the empirical aspect of the relationship between parental income trajectory and a child's success in the U.S. using a novel approach, functional approach.In particular, we find that parental income when their children are in their late teens is more correlated with children's income in their early 30s. In addition, children whose parental income tends to increase in their late teens are more likely to have a higher economic position than their parents. This implies that upward income mobility is positively associated with the steadily increasing economic status of the family over the first 20 years of children's life. Investigated further are the effects on explaining a child's success of the role of other trajectories, such as the family structure of unemployment and job type of household head, and the impact of parental education level. We also investigate the association between parental income profile and their children's college attendance and derive a similar finding that late teens are crucial periods when parents' income has a more significant impact on children's educational success.While the first chapter addresses issues in intergenerational mobility in the U.S., the second chapter focuses on intergenerational mobility in Korea. In the second chapter, using a similar approach to Chapter 1, we analyze the intergenerational mobility in all three dimensions - income, education, and occupation. In addition, reflecting Korea's unique historical and social characteristics, we study the association between investment in private tutoring and a child's economic and educational success. Our findings highlight the importance of parental intervention in teens on a child's educational success. The pattern of parental income profile of the upward mobility group shows a stronger upward trend than that of the downward mobility group, similar to what we observe in the U.S. data in Chapter 1. In Korea, both upward and downward mobility groups show steadily increasing parental income trajectories, reflecting the rapid economic growth Korea has experienced over the last six decades. This interesting and unique finding of mobility patterns in Korea reveals various social and economic structural changes Korea has gone through.The third chapter studies the various methodological issues. In this chapter, we consider how our functional estimate can be varied by the fluctuation of measurement error in parental income. Using Beveridge-Nelson decomposition, we decompose parental income into permanent and transitory components and consider the transitory component as a measurement error. We also compare our estimation method with the methods based on the fixed basis approach. Using too many bases in this approach yields nonsensical estimates, while the estimates using too few bases strongly depend on the shape of the basis. We also find that the fixed basis approach is not robust to measurement error. A possible endogeneity issue is also studied in this chapter. Parental income can affect their children's success through two channels, transmission of human capital and providing financial resources. To focus on the effect of financial resources, we measure intergenerational income mobility using instrumental variables to control the effect of human capital.
Author: Miles Corak
Publisher: Cambridge University Press
ISBN: 9781139455763
Category : Business & Economics
Languages : en
Pages : 348
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Book Description
Labour markets in North America and Europe have changed tremendously in the face of increased globalisation and technical progress, raising important challenges for policy makers concerned with equality of opportunity. This book examines the influence of both changes in income inequality and of social policies on the degree to which economic advantage is passed on between parents and children in the rich countries. Standard theoretical models of generational dynamics are extended to examine generational income and earnings mobility over time and across space. Over twenty contributors from North America and Europe offer comparable estimates of the degree of mobility, changes in mobility, and the impact of government policy. In so doing, they strengthen the analytical tool kit used in the study of generational mobility, and offer insights for research and directions in dealing with equality of opportunity and child poverty.
