Abstract
In this paper we investigate the effects of subsidizing low-skilled, labourintensive services hired by high-skilled individuals in the presence of labour income taxation. Whether such a subsidy can be Paretoimproving 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 language | English |
|---|---|
| Place of Publication | Tilburg |
| Publisher | Macroeconomics |
| Number of pages | 19 |
| Volume | 2010-01 |
| Publication status | Published - 2010 |
Publication series
| Name | CentER Discussion Paper |
|---|---|
| Volume | 2010-01 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 3 Good Health and Well-being -
SDG 8 Decent Work and Economic Growth -
SDG 17 Partnerships for the Goals
Keywords
- household production
- services
- skill premium
- subsidy
- wage tax
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