Second Best Optimal Taxation in the Uzawa-Lucas Model with Externality
Fecha y Hora:
Vie, 04/04/2014 - 12:30pm
Seminario 2 (Félix de Azara)
Jana Hromcová y Miguel Ángel López-García (Presentados por Natalia Utrero)
In this paper we look for the second best optimal policy in the Uzawa-Lucas model with externality in human capital and labor-leisure choice. We study a setup where lump sum taxes are not available. Given that the authorities should aim at increasing time spent studying, we explore which instruments can help government conduct the economy to the highest possible welfare. Our results suggest that both taxes on capital and labor income should be used as instruments to raise revenues for financing the education subsidy. Welfare losses due to different tax policies are illustrated by means of numerical simulations.