Taxation and the allocation of talent

Benjamin B. Lockwood, Charles G. Nathanson, E. Glen Weyl

Research output: Contribution to journalArticle

11 Scopus citations

Abstract

Taxation affects the allocation of talented individuals across professions by blunting material incentives and thus magnifying nonpecuniary incentives of pursuing a “calling.” Estimates from the literature suggest that high-paying professions have negative externalities, whereas lowpaying professions have positive externalities. A calibrated model therefore prescribes negative marginal tax rates on middle-class incomes and positive rates on the rich. The welfare gains from implementing such a policy are small and are dwarfed by the gains from profession-specific taxes and subsidies. These results depend crucially on externality estimates and labor substitution patterns across professions, both of which are very uncertain given existing empirical evidence.

Original languageEnglish (US)
Pages (from-to)1635-1682
Number of pages48
JournalJournal of Political Economy
Volume125
Issue number5
DOIs
StatePublished - Oct 2017

ASJC Scopus subject areas

  • Economics and Econometrics

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