Submitted manuscript, 173 KB, PDF document
Research output: Working paper
Research output: Working paper
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TY - UNPB
T1 - Going for growth: overeducation in a tax competition game
AU - Johnes, G
PY - 2002
Y1 - 2002
N2 - A model of international tax competition is developed in which taxes are raised in order to finance education which in turn raises income. It is shown that, in contrast to results from the tax competition literature, the outcome of a non-cooperative game can be to raise the tax rate, with the result that investment in education exceeds that which is globally socially optimal. This provides an explanation for the tendency for countries to emphasise growth as an objective in spite of what empirical studies tell us about the impact of income on happiness; it also identifies a new type of overeducation.
AB - A model of international tax competition is developed in which taxes are raised in order to finance education which in turn raises income. It is shown that, in contrast to results from the tax competition literature, the outcome of a non-cooperative game can be to raise the tax rate, with the result that investment in education exceeds that which is globally socially optimal. This provides an explanation for the tendency for countries to emphasise growth as an objective in spite of what empirical studies tell us about the impact of income on happiness; it also identifies a new type of overeducation.
KW - growth
KW - overeducation
KW - tax competition
KW - income distribution
KW - international social welfare function
M3 - Working paper
T3 - Economics Working Paper Series
BT - Going for growth: overeducation in a tax competition game
PB - The Department of Economics
CY - Lancaster University
ER -