The 1980s' tax reforms and the changing dispersion of wages offer one of the best opportunities yet to estimate labour supply effects. Nevertheless, changing sample composition, aggregate shocks, the changing composition of the tax paying population and discontinuities in the tax system create serious identification and estimation problems. We develop grouping estimators, that address these issues. Our results reveal positive and moderately-sized wage elasticities. We also find negative income effects for women with children.
Authors
Alan Duncan
CPP Co-Director
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Research Fellow Yale University
Costas is a Research Fellow of the IFS and a Professor of Economics at Yale University and a Visiting Professor at University College London.
Working Paper details
- DOI
- 10.1920/wp.ifs.1995.9507
- Publisher
- IFS
Suggested citation
R, Blundell and A, Duncan and C, Meghir. (1995). Estimating labour supply responses using tax reforms. London: IFS. Available at: https://ifs.org.uk/publications/estimating-labour-supply-responses-using-tax-reforms (accessed: 26 April 2024).
More from IFS
Understand this issue
If you can’t see it, you can’t be it: role models influence female junior doctors’ choice of medical specialty
24 April 2024
The £600 billion problem awaiting the next government
25 April 2024
A mess has been made of Child Benefit, and the clear-up operation may not be easy
29 March 2024
Policy analysis
Recent trends in and the outlook for health-related benefits
19 April 2024
4.2 million working-age people now claiming health-related benefits, could rise by 30% by the end of the decade
19 April 2024
Gap between higher- and lower-paid public sector workers falls by more than a third since 2007 as doctors and experienced teachers have faced unprecedented pay cuts
26 March 2024
Academic research
Labour market inequality and the changing life cycle profile of male and female wages
15 April 2024
Interpreting cohort profiles of lifecycle earnings volatility
15 April 2024
There and back again: women’s marginal commuting costs
2 April 2024