At whose service? Subsidizing services and the skill premium

Bas van Groezen, L. Meijdam

    Research output: Working paperAcademic

    Abstract

    In this paper we investigate the effects of subsidizing low-skilled, labour-intensive
    services hired by high-skilled individuals in the presence of labour income taxation.
    Whether such a subsidy can be Pareto-improving depends crucially on the degree of substitutability of both types of labour in the non-service sector. In case of some
    substitutability, a service subsidy can benefit all and decrease inequality, but in case of complementarity, low-skilled individuals benefit and high-skilled individuals are worse off.
    Original languageEnglish
    Place of PublicationUtrecht
    PublisherUU USE Tjalling C. Koopmans Research Institute
    Number of pages17
    Publication statusPublished - Nov 2009

    Publication series

    NameDiscussion Paper Series / Tjalling C. Koopmans Research Institute
    No.30
    Volume09
    ISSN (Electronic)2666-8238

    Keywords

    • household production
    • services
    • skill premium
    • subsidy
    • wage tax

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