> Under simplifying assumptions, including competitive labor markets, no direct schooling costs, and constant proportional returns, this specification yields an interpretable estimate of the average percentage increase in earnings associated with an additional year of schooling.
So, an individual student will be expected to have higher earnings with more schooling. But as a matter of public policy that involves taxpayer funding of higher education, I cannot accurately base those decisions on a methodology that assumes a cost of zero ("no direct schooling costs").
Your source also identifies that higher marginal returns are found in lower-income, lower-educated countries, which makes sense. How much marginal return (for the taxpayer dollar) can we expect in a high-income country with a service-based economy and a third of the population already having a bachelor's degree?
There's evidence that increasing cost of operation of corporations through taxation is not fully born by workers. It falls in large part on the owners and landlords (who were omited in earlier works on income tax incidence).
> We find strong evidence of partial shifting of the burden of income tax from worker to employer. Although income tax is incident on equilibrium wages, the tax burden is not fully shifted
Debunking your claim:
> While in practice employers know exactly for how little money (in hand) you are willing to work and in absence of income taxes would just pay this much less so that your money in hand is the same.
I exaggerated my claim to draw attention to the fact that it's not like many people believe, that income tax burden lands fully on the worker.
While my claim sound proposterous the opposite claim that is also false (maybe even equally so) rarely ever raises an eyebrow, which I think is very telling.
> Gruber is able to identify incidence on gross earnings as well as on employment by exploiting variation in payroll tax changes between firms. The benefit of the payroll tax cut is found to have been fully shifted to workers through higher earnings, with no significant employment effects. With similar objectives, Anderson and Meyer, 1997, Anderson and Meyer, 1998 use US firm-level micro data to measure the effects of changes in an experience rated Unemployment Insurance system. Payment variation between firms, due to the number of workers laid off subsequently claiming UI benefits, allows identification of the incidence of the tax on earnings. At the four-digit industry level, Anderson and Meyer find full shifting of the burden of higher payroll tax from employers to workers in the form of lower earnings. They report insignificant employment effects.
We find strong evidence of partial shifting of the burden of income tax from worker to employer. Although income tax is incident on equilibrium wages, the tax burden is not fully shifted.
"Higher marginal tax rates are associated with increases in gross wages and earnings."
The part that you cited is where they cite the old papers by other authors. They also say why conclusions of those papers might have been wrong:
"Moreover, we show that ignoring the potential labour supply response to a tax change, following the methodology of Gruber (1997) or Anderson and Meyer (1998), as well as ignoring the endogeneity of the marginal tax rate, may lead to the erroneous conclusion that the tax is fully incident on equilibrium earnings."
Right, the tax is partially borne by employers (who raise gross wages), and partially by workers (who receive lower net wages).
Debunking your claim:
> While in practice employers know exactly for how little money (in hand) you are willing to work and in absence of income taxes would just pay this much less so that your money in hand is the same.
When? Because we don't use market solutions for those things now. Those are two of the most manipulated markets in the US. They also are two of the three industries whose prices increased by more than inflation, everything else has gotten cheaper (inflation adjusted) over the last several decades. Those things are related.
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