Firm Training and Capital Taxation

Author: Lechthaler, Wolfgang

Source: Journal of Institutional and Theoretical Economics JITE, Volume 167, Number 2, June 2011 , pp. 175-201(27)

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Abstract:

In the setup of an overlapping-generations model with firm training, I analyze the consequences of a tax on capital income. A capital tax influences training investments via two opposing effects. On the one hand, it lowers the stock of physical capital and thereby the productivity of training. On the other hand, the degree of wage compression is increased, improving the incentives to train. In principle either effect can dominate. If the wage-compression effect dominates, it is possible that a tax on capital income increases welfare, since underinvestment in training is more severe than underinvestment in physical capital.

Document Type: Research article

DOI: http://dx.doi.org/10.1628/093245611796589933

Publication date: 2011-06-01

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Founded as Zeitschrift f�r die gesamte Staatswissenschaft in 1844.

As one of the oldest journals in the field of political economy, the Journal of Institutional and Theoretical Economics (JITE) deals traditionally with the problems of economics, social policy, and their legal framework. JITE is listed in the Journal of Economic Literature, the Social Science Citation Index, the International Bibliography of the Social Sciences, and COREJ.
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