Stark, Oded and Hyll, Walter (2010): Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy. Forthcoming in: Economica
Download (96Kb) | Preview
This paper considers a setting in which the acquisition of human capital entails a change of location in social space that causes individuals to revise their comparison groups. Skill levels are viewed as occupational groups, and moving up the skill ladder by acquiring additional human capital, which in itself is rewarding, leads to a shift in the individual’s inclination to compare himself with a different, and on average better-paid, comparison group, which in itself is penalizing. The paper sheds new light on the dynamics of human capital formation, and suggests novel policy interventions to encourage human capital formation in the aggregate and, at the same time, reduce inter-group income inequality.
|Item Type:||MPRA Paper|
|Original Title:||Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy|
|Keywords:||Human capital formation; Skill levels as occupational groups; Interpersonal comparisons; Relative deprivation; Tax policy; Subsidization|
|Subjects:||D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies
J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
|Depositing User:||Oded Stark|
|Date Deposited:||28. Feb 2011 14:27|
|Last Modified:||21. Feb 2013 04:51|
AKERLOF, G. A. (1997). Social Distance and Social Decisions. Econometrica, 65, 1005-27.
ALESINA, A. and RODRIK, D. (1994). Distributive Politics and Economic Growth. Quarterly Journal of Economics, 109, 465-90.
BELLEY, P. and LOCHNER, L. (2007). The Changing Role of Family Income and Ability in Determining Educational Achievement. Journal of Human Capital, 1, 37-89.
BOSKIN, M. J. (1975). Notes on the Tax Treatment of Human Capital. National Bureau of Economic Research Working Paper no. W0116.
BOWLES, S. and PARK, Y. (2005). Emulation, Inequality, and Work Hours: Was Thorstein Veblen Right? Economic Journal, 115, 397-412.
CLARK, A. E., FRIJTERS, P. and SHIELDS, M. A. (2008). Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles. Journal of Economic Literature, 46, 95-144.
COLEMAN, J. S., CAMPBELL, E. Q., HOBSON, C. J., MCPARTLAND, J., MOOD, A. M., WEINFELD, F. D. and YORK, R. L. (1966). Equality of Educational Opportunity. Washington, D.C.: U.S. Government Printing Office.
CUNHA, F. and HECKMAN, J. J. (2009). The Economics and Psychology of Inequality and Human Development. Journal of the European Economic Association, 7, 320-64.
DIAMOND, P. (1998). Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates. American Economic Review, 88, 83-95.
DUESENBERRY, J. S. (1949). Income, Saving and the Theory of Consumer Behavior. Cambridge, MA: Harvard University Press.
EATON, J. and ROSEN, H. S. (1980). Taxation, Human Capital, and Uncertainty. American Economic Review, 70, 705-15.
EIBNER, C. and EVANS, W. N. (2005). Relative Deprivation, Poor Health Habits, and Mortality. Journal of Human Resources, 40, 591-620.
FAN, C. S. and STARK, O. (forthcoming). A Theory of Migration as a Response to Occupational Stigma. International Economic Review.
FAN, C. S. and STARK, O. (2008). Looking at the ‘Population Problem’ through the Prism of Hetereogeneity: Welfare and Policy Analyses. International Economic Review, 49, 799-835.
KAPICKA, M. (2006). Optimal Income Taxation with Human Capital Accumulation and Limited Record Keeping. Review of Economic Dynamics, 9, 612-39.
LUTTMER, E. F. P. (2005). Neighbors as Negatives: Relative Earnings and Well-Being. Quarterly Journal of Economics, 120, 963-1002.
MIRRLEES, J. A. (1971). An Exploration in the Theory of Optimum Income Taxation. Review of Economic Studies, 38, 175-208.
PERSSON, T. and TABELLINI, G. (1994). Is Inequality Harmful for Growth? American Economic Review, 84, 600-21.
STARK, O. (1993). The Migration of Labor. Oxford and Cambridge, MA: Blackwell.
STARK, O. and WANG, Y. Q. (2005). Towards a Theory of Self-Segregation as a Response to Relative Deprivation: Steady-State Outcomes and Social Welfare. In L. Bruni and P. L. Porta (eds.), Economics and Happiness: Framing the Analysis. Oxford: Oxford University Press, 223-42.
STUTZER, A. (2004). The Role of Income Aspirations in Individual Happiness. Journal of Economic Behavior and Organization, 54, 89-109.
VEBLEN, T. (1924). The Theory of the Leisure Class: An Economic Study of Institutions. London: Allen & Unwin.
WALKER, I. and SMITH, H. J., eds. (2002). Relative Deprivation: Specification, Development, and Integration. Cambridge: Cambridge University Press.
WILKINSON, R. and PICKETT, K. (2009). The Spirit Level: Why More Equal Societies Almost Always Do Better. London: Allen Lane.
YITZHAKI, S. (1979). Relative Deprivation and the Gini Coefficient. Quarterly Journal of Economics, 93, 321-24.
Available Versions of this Item
- Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy. (deposited 28. Feb 2011 14:27) [Currently Displayed]