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.
Authors
CPP Co-Director
Eric is the Montague Burton Professor of Industrial Relations and Labour Economics at the University of Cambridge and Professor of Economics at UCL.
Daniel Aaronson
Journal article details
- DOI
- 10.3368/jhr.44.2.386
- Publisher
- Board of Regents of the University of Wisconsin System
- Issue
- Volume 2, Issue 44, March 2009, pages 386-408
Suggested citation
Aaronson, D and French, E. (2009). 'The Effects of progressive taxation on labor supply when hours and wages are jointly determined' 2(44/2009), pp.386–408.
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