ECON 306 Lecture Notes - Lecture 8: Diminishing Returns, Progressive Tax, Flat Tax

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In the real world there would be the two effects (increase of individual productivity and signalling process) Offered wage signalling cost schedule forget that diagram. If university educations biggest role is filtering/signalling, there will be great self- selection by the more able, which means that the less able are getting little help! Large part of education subsidies would be transfer to higher-ability students. The less able (lower income) are working thus pay tax that is used to subsidize the more able who will have the higher income. This (cid:272)ould (cid:271)e used as a (cid:396)easo(cid:374) fo(cid:396) a p(cid:396)og(cid:396)essi(cid:448)e ta(cid:454) st(cid:396)u(cid:272)tu(cid:396)e? (cid:894)p(cid:396)of"s (cid:448)ie(cid:449) is that flat tax system has incentives etc. but raise social issues) This means that law degrees can (cid:373)ake a lot of (cid:373)o(cid:374)e(cid:455) a(cid:374)d si(cid:374)(cid:272)e (cid:862)so(cid:272)ial s(cid:272)ie(cid:374)(cid:272)e(cid:863) is a (cid:271)(cid:396)oad category, their big income is lost in the calculations.

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