European Business Schools Librarian's Group
Working Papers,
Copenhagen Business School, Department of Economics
No 23-2005: Money or Joy
Annette Alstadsæter, Anne-Sofie Kolm and Birthe Larsen
Additional contact information
Annette Alstadsæter: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Anne-Sofie Kolm: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Birthe Larsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Abstract: This paper examines the effect of taxes on the individuals' choices of educational direction, and thus on the economy.s skill composition. A proportional labour tax induces too many workers with high innate ability to choose an educational type associated with high consumption value and low effort. This increases the skill mismatch and aggregate unemployment in the economy. The government can correct for this distortion by use of differentiated tuition fees or tax rates.
Keywords: Unemployment; matching; education; optimal taxation; tuition fees
25 pages, November 28, 2005
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