Endogenous Ben-Porath model and taxes

This paper is about taxes in endogenous Ben-Porath model. First it derives exogenous Ben-Porath model with moral hazard (education effort is unobservable due to moral hazard) ,and usual Mirrlees, Pareto and Ramsey taxes. Separation theorem justifies use of labour taxes but compared to Atkinson-and Stiglitz theorem where savings and consumption should not be taxed separately, separation theorem states that human capital accumulation and consumption-saving are independent. Instead of taxing labor income heavily, education should be subsidized to encourage investment in human capital. Policy makers have justification about progressive taxation that should be paired with education subsidies to correct any underinvestment in human capital.Labour income should be primary tax base,and capital income taxation should be minimized. In endogenous determination of life expectancy or retirement model vs endogenizing by allowing individuals to choose both the level and the type of human capital accumulation the result about evolution of human capital and tax revenues under different tax regimes are inverse. In the models of tax formulas with spillover effects, they(spillover effects) are present in the Pareto tax formula, while labor supply elasticity and elasticity of consumption affect Mirrleesian and Ramsey taxation respectivelly.