Education and optimal dynamic taxation: The role of income-contingent student loans

• 成果类型: Article
• 署名作者: Findeisen, Sebastian; Sachs, Dominik
• 署名单位: University of Mannheim; Centre for Economic Policy Research - UK; European University Institute
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2016.03.009
• 发表日期: 2016
• 页码: 1-21
• 关键词: Optimal taxation; education; education finance; student loans

摘要

We study the optimal design of integrated education finance and tax systems. The distribution of wages is endogenously determined by the costly education decisions of heterogeneous individuals before labor market entry. Consistent with empirical evidence, this human capital investment decision is risky. We find that an integrated education and tax system in which the government provides education loans to young individuals coupled with income-contingent repayment can always be designed in a Pareto optimal way. We present a simple empirically driven application of the framework to US data in which individuals make a college entry decision. We find the optimal repayment schemes for college loans can be well approximated by a schedule that is linearly increasing in income up to a threshold and constant afterwards. So although the full optimum could lead to complicated non-linear schedules in theory, very simple instruments can replicate it fairly well. The welfare gains from income -contingent repayment are significant. (C) 2016 Elsevier B.V. All rights reserved.