American Economic Journal: Macroeconomics
no. 3, July 2023
We study optimal tax policies with human capital investment and retirement savings for present-biased agents. Agents are heterogeneous in their innate ability and make risky education investments, which determines their labor productivity. We demonstrate that the optimal distortions vary with education status. In particular, the optimal policy encourages human capital investment with savings incentives. Our implementation uses income-contingent student loans and existing retirement policies, augmented by a new tax instrument that subsidizes retirement savings for college graduates. The instrument mimics the latest policy proposals by allowing employers to offer 401(k) matching contributions proportional to student loans repayment.
Paluszynski, Radoslaw, and Pei Cheng Yu.
"Efficient Consolidation of Incentives for Education and Retirement Savings."
American Economic Journal: Macroeconomics,
Household Finance: Household Saving, Borrowing, Debt, and Wealth
Taxation and Subsidies: Efficiency; Optimal Taxation
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Returns to Education
Human Capital; Skills; Occupational Choice; Labor Productivity
Retirement; Retirement Policies