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At Whose Service? Subsidizing Services and the Skill Premium

Research output: Working paperDiscussion paper

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 languageEnglish
Place of PublicationTilburg
Number of pages19
StatePublished - 2010

Publication series

NameCentER Discussion Paper

    Research areas

  • household production, services, skill premium, subsidy, wage tax


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