# The effect of endogenous human capital accumulation on optimal taxation

@article{Peterman2012TheEO, title={The effect of endogenous human capital accumulation on optimal taxation}, author={William B. Peterman}, journal={Review of Economic Dynamics}, year={2012}, volume={21}, pages={46-71} }

This paper considers the impact of endogenous human capital accumulation on optimal tax policy in a life cycle model. Including endogenous human capital accumulation, either through learning-by-doing or learning-or-doing, is analytically shown to create a motive for the government to use age-dependent labor income taxes. If the government cannot condition taxes on age, then it is optimal to use a tax on capital in order to mimic such taxes. Quantitatively, introducing learning-by-doing or…

## 39 Citations

Taxing capital? The importance of how human capital is accumulated

- EconomicsEuropean Economic Review
- 2019

This paper considers the impact of how human capital is accumulated on optimal capital tax policy in a life cycle model. In particular, it compares the optimal capital tax when human capital is…

Taxing Capital? The Importance of How Human Capital is Accumulated

- SSRN Electronic Journal
- 2019

This paper shows that in a life-cycle framework, the optimal tax on capital crucially depends on how human capital is accumulated. We focus on three cases common to the macroeconomic literature: (i)…

Optimal factor tax incidence in two-sector human capital-based models

- Economics
- 2013

This paper studies the optimal factor tax incidence in a standard two-sector, human capital-based endogenous growth model elucidated by Lucas (1988). Capital income taxes generate dynamic…

Optimal Taxation with Risky Human Capital

- EconomicsAmerican Economic Journal: Macroeconomics
- 2019

We study optimal tax policies in a life-cycle economy with permanent ability differences and risky human capital investments that have both an unobservable component, learning effort, and an…

Determining the Motives for a Positive Optimal Tax on Capital

- Economics
- 2011

Previous literature demonstrates that in a computational life cycle model the optimal tax on capital is positive and large. Given the computational complexities of these overlapping generations…

Optimal Mirrleesean Taxation and Human Capital Investment†

- 2018

This paper characterizes optimal capital and labor income taxes in a lifecycle model of human capital investment with heterogeneous agents of continuous types. The key feature of the model is that…

Optimal Capital Taxation with Idiosyncratic Investment Risk

- Economics
- 2012

We examine the optimal taxation of capital in a Ramsey setting of a general-equilibrium heterogeneous-agent economy with uninsurable idiosyncratic investment or capital-income risk. We prove that the…

Optimal Taxation with Risky Human Capital

- 2015

We study optimal tax policies in a life-cycle economy with risky human capital and permanent ability differences. The optimal policies balance redistribution across agents, insurance against human…

Optimal Taxation in a Life-Cycle Economy with Endogenous Human Capital Formation

- Economics
- 2012

We study efficient allocations and optimal policies in a life-cycle economy with risky human capital accumulation. The agents are ex-ante heterogeneous in their initial human capital and in their…

Optimal Capital Taxation with Idiosyncratic Investment Risk

- 2012

We examine the optimal taxation of capital in a general-equilibrium heterogeneous-agent economy with uninsurable idiosyncratic investment or capital income risk. We demonstrate analytically that the…

## References

SHOWING 1-10 OF 85 REFERENCES

Optimal income taxation with human capital accumulation and limited record keeping

- Economics
- 2006

Abstract This paper characterizes optimal income taxes in a dynamic economy where human capital is unobservable and the government is restricted to use taxes that depend only on current income. I…

The Dynamics of Optimal Taxation when Human Capital is Endogenous

- Economics
- 2006

This paper characterizes the dynamics of Pareto efficient income taxes in a dynamic economy with human capital accumulation. I extend the tools and insights developed by Mirrlees (1971) into a…

Human capital and optimal positive taxation of capital income

- Economics
- 2005

This paper analyzes optimal linear and non-linear taxes on capital and labor incomes in a life-cycle model of human capital investment, financial savings, and labor supply with heterogenous…

Optimal Taxation and Human Capital Policies Over the Life Cycle

- Economics
- 2014

This paper derives optimal income tax and human capital policies in a dynamic life cycle model of labor supply and risky human capital formation. The wage is a function of both stochastic,…

Determining the Motives for a Positive Optimal Tax on Capital

- Economics
- 2011

Previous literature demonstrates that in a computational life cycle model the optimal tax on capital is positive and large. Given the computational complexities of these overlapping generations…

Optimal Nonlinear Income Taxation with Learning-by-Doing

- Economics
- 2009

This paper examines a two-period model of optimal nonlinear income taxation with learning-by-doing, in which second-period wages are an increasing function of first-period labour supply. We consider…

An Extensive Look at Taxes: How Does Endogenous Retirement Affect Optimal Taxation?

- Economics
- 2012

This paper considers the impact on optimal tax policy of including endogenously determined retirement in a life cycle model. Allowing individuals to determine when they retire causes the optimal tax…

Taxing capital is not a bad idea indeed: the role of human capital and labor-market frictions

- Economics
- 2011

In a second-best optimal growth setup with only factor taxes as available instruments, is it optimal to fully replace capital by labor income taxation? The answer is generally positive based on…

Taxing Capital? Not a Bad Idea after All!

- Economics
- 2006

In this paper we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks, where households also differ…

Optimal Taxation in Life-Cycle Economies

- Economics, Computer ScienceJ. Econ. Theory
- 2002

We use a very standard life-cycle growth model, in which individuals have a labor-leisure choice in each period of their lives, to prove that an optimizing government will almost always find it…