Free Research Topic

I know some econ grad students read this blog, so let me offer them a suggestion for a dissertation chapter (or maybe for a Harvard undergrad senior thesis): More work on dynamic scoring, focusing on human capital.

In my paper with Matthew Weinzierl on dynamic scoring, we wrote in the conclusion:

Although we have explored several variations of the basic Ramsey model to evaluate the robustness our conclusions, there are surely issues still to be addressed. As we noted earlier, some economists have emphasized the short-run Keynesian effects of tax policy, and these effects may be important for dynamic scoring. In addition, much of the literature on economic growth has stressed the role of human capital, which is absent from the models considered here. How tax policy affects human capital accumulation and how human capital affects economic growth are hard questions, but they may be crucial for revenue estimation, especially over longer time periods. Finally, examining alternative financing regimes may also prove fruitful; our assumption that lump-sum transfers adjust immediately to revenue changes has usefully simplified the problem but may be empirically unrealistic. In light of all the open questions, the results presented in this paper should be viewed only as first steps.

The topic of financing has already been taken up by Leeper and Yang (although I am sure their paper is not the last word on the subject). But the other two suggestions we made are wide open.

In my previous post, I quoted a passage from Eddie Lazear in which he emphasizes the effect on taxes on human capital accumulation. It would be useful to expand on Eddie's insight by building the human capital decision into an explicit growth model and then using the model to perform dynamic scoring of tax changes.