RESEARCH PAPER
Taxes and Externalities in the Nelson-Phelps Model with Heterogenity
| 1 | Kolegium Analiz Ekonomicznych, Szkoła Główna Handlowa w Warszawie, Polska |
CORRESPONDING AUTHOR
Submission date: 2019-04-16
Final revision date: 2019-12-05
Acceptance date: 2020-01-15
Publication date: 2020-03-31
GNPJE 2020;301(1):75–96
KEYWORDS
JEL CLASSIFICATION CODES
ABSTRACT
This paper aims to answer the question of whether it is economically profitable for net taxpayers to introduce public education financed by consumption or income tax in a situation where it is impossible to finance public education with a flat-rate tax. This question was answered using a modified Nelson-Phelps model including both private and public investments in human capital. The results obtained indicate that such a move may be profitable, especially in the case of developing countries with insignificant differences in property. It was also found that positive income effects are greater in the case of financing education with consumption tax, and that in developed countries such effects can only occur with this type of tax. On the other hand, developing countries may find it more socially profitable to introduce education financed by income tax due to the greater tax base and a stronger positive effect on human capital.
REFERENCES (23)
1.
Arrow K. [1951], An Extension of the Basic Theorems of Classical Welfare Economics, Berkeley Symposium on Mathematical Statistics and Probability.
2.
Barro R., Mankiw N. G., Sala-i-Martin X. [1992], Capital Mobility in Neoclassical Models of Growth, NBER Working Paper No. 4206.
3.
Becker G. [1964], Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Harvard University Press, Cambridge.
4.
Benhabib J., Spiegel M. [1994], The role of human capital in economic development evidence from aggregate cross-country data, Journal of Monetary Economics, 34 (2).
5.
Benhabib J., Spiegel M. [2002], Human Capital and Technology Diffusion, FRB of San Francisco Working Paper No. 2003–2.
6.
Blankenau W., Simpson N. [2004], Public Education Expenditures and Growth, Journal of Development Economics, 73 (2).
7.
Blankenau W., Simpson N., Tomljanovich M. [2007], Public Education Expenditures, Taxation and Growth: Linking Data to Theory, The American Economic Review, 97 (2).
8.
Croix de la D., Doepke M. [2007], To Segregate or to Integrate: Education Politics and Democracy, NBER Working Paper No. 13319.
9.
Dissou Y., Didic S., Yakautsava T. [2016], Government spending on education, human capital accumulation, and growth, Economic Modelling, 58.
10.
Domenech R., Fuente de la A. [2001], Schooling Data, Technological Diffusion, and the Neoclassical Model, The American Economic Review, 91 (2).
11.
Dorosiewicz S. [2003], Równania różniczkowe zwyczajne, w: Dorosiewicz S. (red.), Matematyka Tom III, Warszawa, Oficyna Wydawnicza SGH.
12.
Drazen A. [2000], Political economy in macroeconomics, Princeton, Princeton University Press. Fuente de la A. [2000], Mathematical Methods and Models for Economists, Cambridge University Press, USA.
14.
Kłopotowski J., Kołatkowski D. [2007], Funkcje jednej zmiennej, w: Dorosiewicz S. (red.), Matematyka Tom I, Warszawa, Oficyna Wydawnicza SGH, wyd. drugie.
15.
Lucas R. [1998], On the Mechanics of Economic Development, Journal of Monetary Policy, 22.
16.
Mankiw N. G., Weinzierl M., Yagan D. [2009], Optimal Taxation in Theory and Practice, https://dash.harvard.edu/bitst..., dostęp 22.09.2017.
17.
Mincer J. [1958], Investment in Human Capital and Personal Income Distribution, Journal of Political Economy, 66 (4).
18.
Mirrlees J. [1971], An Exploration in the Theory of Optimum Income Taxation, The Review of Economic Studies, 38 (2).
19.
Nelson R., Phelps E. [1966], Investment in Humans, Technological Diffusion, and Economic Growth, The American Economic Review, 56 (1/2).
21.
Ramsey F. [1927], A Contribution to the Theory of Taxation, The Economic Journal.
22.
Sharif M., Ramanathan K. [1981], Binomial innovation diffusion models with dynamic potential adopter population, Technological Forecasting and Social Change, 20 (1).
23.
Uzawa H. [1965], Optimum Technical Change in an Aggregative Model of Economic Growth, International Economic Review, 6 (1).
RELATED ARTICLE
