Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy

Oded Stark and Walter Hyll

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: Human capital formation; Skill levels as occupational groups; Interpersonal comparisons; Relative deprivation; Tax policy; Subsidization (search for similar items in EconPapers)
JEL-codes: D11 H24 H30 J24 (search for similar items in EconPapers)
Date: 2010
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https://mpra.ub.uni-muenchen.de/28909/1/MPRA_paper_28909.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/30623/1/MPRA_paper_30623.pdf revised version (application/pdf)

Related works:
Journal Article: Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy (2012)
Working Paper: Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy (2011)
Working Paper: Endogenous selection of comparison groups, human capital formation, and tax policy (2011)
Working Paper: Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28909

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