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The Effects of Progressive Taxation on Labor Supply when Hours and Wages Are Jointly Determined

The Effects of Progressive Taxation on Labor Supply when Hours and Wages Are Jointly Determined Abstract: This paper extends a standard intertemporal labor supply model to account for progressive taxation as well as the joint determination of hourly wages and hours worked. We show that these two factors can have implications for both estimating labor supply elasticities as well as for using these elasticities in tax analysis. Failure to account for wage-hours ties and progressive taxation may cause the hours response to marginal tax rate changes to be understated by 5 to 30 percent for men. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Human Resources University of Wisconsin Press

The Effects of Progressive Taxation on Labor Supply when Hours and Wages Are Jointly Determined

Journal of Human Resources , Volume 44 (2) – Apr 4, 2009

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Publisher
University of Wisconsin Press
Copyright
Copyright © University of Wisconsin Press
ISSN
1548-8004
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Abstract

Abstract: This paper extends a standard intertemporal labor supply model to account for progressive taxation as well as the joint determination of hourly wages and hours worked. We show that these two factors can have implications for both estimating labor supply elasticities as well as for using these elasticities in tax analysis. Failure to account for wage-hours ties and progressive taxation may cause the hours response to marginal tax rate changes to be understated by 5 to 30 percent for men.

Journal

Journal of Human ResourcesUniversity of Wisconsin Press

Published: Apr 4, 2009

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