We consider redistributional taxation between people with and without human capital if education is endogenous and if individuals differ in their perceptions about own ability. Those who see their ability as low like redistributive taxation because of the transfers it generates. Those who see their ability as high may also like redistributive taxation because it stops other people receiving education and increases the quasi rents on their own human capital. It is surprising that this rather indirect effect can overcompensate them for the income loss from taxation and make the overconfident want higher taxes than the less confident do. The results, however, turn out to be in line with empirical evidence on the desired amount of redistribution among young individuals.
We consider here redistributive taxation among agents with and without human capital when education is endogenous and when agents differ in their perception of their own productivity. Those who think they are not very productive prefer more redistribution because of the higher transfers they receive. Those who believe they are more productive may prefer more redistribution because it disincentives others to educate themselves and thus increases the quasi-rent of one’s human capital. It is surprising that this rather indirect effect can overcompensate the most productive agents for the loss of income derived from higher taxation, to the point that they prefer to pay more taxes than the less productive. The results are consistent with empirical evidence on the amount of redistribution desired among young people.
2023-12-15 01:17:56
#Education #redistributive #taxation #confidence
