"In the proposed research project I plan to investigate optimal tax policies and efficient allocations in an environment where people can increase their skills either by formal schooling or by informal schooling like on the job training. Unlike the existing dynamic optimal tax literature I plan to explicitly consider both formal and informal schooling. This will allow me to analyze two distinct dimensions of the optimal schooling policies, and to assess and compare the potential welfare gains from both. I also plan to solve the problem under realistic assumptions about the heterogeneity in the economy. In particular, I will allow for heterogeneity in both abilities, and in realized returns to human capital over a life-cycle. Models with both of those elements have been successful in replicating and explaining the distribution of earnings and consumption observed in the data.
The project's main contribution is to study optimal taxation with human capital in a framework that is both realistic enough to be useful for policy analysis, and at the same time tractable enough to allow us to carry out the analysis. Its ambition is to come up with quantitative findings that will set a benchmark for the literature studying optimal taxation with human capital formation."
Call for proposal
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