Taxes, benefits, careers, and markets
نویسندگان
چکیده
An incomplete markets life-cycle model with indivisible labor makes career lengths and human capital accumulation respond to labor tax rates and government supplied non-employment benefits. We compare aggregate and individual outcomes in this individualistic incomplete markets model with those in a comparable collectivist representative family with employment lotteries and complete insurance markets. The incomplete and complete market structures assign leisure to different types of individuals who are distinguished by their human capital and age. These microeconomic differences distinguish the two models in terms of how macroeconomic aggregates respond to some types of government supplied non-employment benefits, but remarkably, not to labor tax changes. ∗Ljungqvist: Stockholm School of Economics and New York University (email: [email protected]); Sargent: New York University and Hoover Institution (email: [email protected]). We thank Matteo Pignatti and Demian Pouzo for excellent help with the computations.
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