Labour Supply and Taxes
نویسندگان
چکیده
In this paper we provide an overview of the literature relating labour supply to taxes and welfare benefits with a focus on presenting the empirical consensus. We begin with a basic continuous hours model, where individuals have completely free choice over their hours of work. We then consider fixed costs of work, the complications introduced by the benefits system, dynamic aspects of labour supply and we place the analysis in the context of the family. The key conclusion of this work is that in order to estimate the impact of tax reform and be able to generalise results, a structural approach that takes account of many of these issues is desirable. We then discuss the “new Tax Responsiveness” literature which uses the response of taxable income to the marginal tax rate as a summary statistic of the behavioural response to taxation. Underlying this approach is the unsatisfactory nature of using hours as a proxy for labour effort for those with high levels of autonomy on the job and who already work long hours, such as the self employed or senior executives. After discussing relevant theory we then provide a summary of empirical estimates and the methodology underlying the studies. Our conclusion is that hours of work are relatively inelastic for men, but are a little more responsive for married women and lone mothers. On the other hand, participation is quite sensitive to taxation and benefits for women. Within this paper we present new estimates form a discrete participation model for both married and single men based on the numerous reforms over the past two decades in the UK. We find that the participation of low education men is somewhat more responsive to incentives than previously thought. For men with high levels of education, participation is virtually unresponsive; here the literature on taxable income suggests that there may be significant welfare costs of taxation, although much of this seems to be a result of shifting income and consumption to non-taxable forms as opposed to actual reductions in work effort. ∗Acknowledgements. This paper is a chapter prepared for the The Mirrlees Review: Reforming the Tax System for the 21st Century, conducted at the Institute for Fiscal Studies. We would like to thank the contributors to this volume and in particular Stuart Adam, Richard Blundell, Mike Brewer, Eric French and Guy Laroque for their comments. Financial support by the ESRC is gratefully acknowledged. Costas Meghir has been financed by the ESRC Professorial Fellowship Scheme. JEL Codes: J22, H24, H31.
منابع مشابه
Energy Policy and Carbon Emission in Russia: A Short Run CGE Analysis
In this study we investigate the economic effects of carbon taxes on the Russian economy. The main findings of this study are the following: an introduction of carbon taxes compensated by an increase in lump-sum subsidies may weak the Russian economy through higher energy costs. Moreover, such an environmental tax reform could induce Dutch disease in Russia because of increases in the domestic ...
متن کاملDiscreteness and the Welfare Cost of Labour Supply Tax Distortions
We compare the welfare costs of tax distortions of labour supply in one and two member household discrete and continuous labour supply (leisure consumption) choice models. In the discrete models taxes induce a large response from a subset of the population, while the majority of the population exhibits unchanged behaviour. In contrast the majority of the population reacts to tax changes in cont...
متن کاملTaxation and labour supply: Evidence from a representative population survey
We study how taxation influences labour supply using a specifically designed representative survey of the German population. First, we investigate whether taxes generally matter for the labour supply decisions of our respondents. Around 41 per cent report taking taxes into consideration, implying that the majority of the German population is unresponsive to taxation. Second, we look at self-rep...
متن کاملTaxation and Labour Supply:
We study the influence of taxation on labour supply using a specifically designed representative survey of the German population. First, we investigate whether taxes generally matter for the labour supply decisions of our respondents. Around 41 per cent report taking taxes into consideration, which implies that the majority of the German population appears unresponsive to taxation. Second, we l...
متن کاملCollective Labour Supply, Taxes, and Intrahousehold Allocation: An Empirical Approach
Collective Labour Supply, Taxes, and Intrahousehold Allocation: An Empirical Approach1 Most empirical studies of the impact of labour income taxation on the labour supply behaviour of households use a unitary modelling approach. In this paper we empirically analyze income taxation and the choice of working hours by combining the collective approach for household behaviour and the discrete hours...
متن کاملCarbon taxation and market structure: A CGE analysis for Russia
Russia is one of the world’s major sources of carbon based energy as well as one its most intensive users. Introducing carbon taxes can lead to a reduction in emissions and encourage investment in energy efficiency. We investigate the economic effects of carbon taxes on the Russian economy under perfect competition and a Cournot oligopoly in output markets. The main findings are: (i) substituti...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2008