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Estimating Intensive And Extensive Tax Responsiveness

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  • Abby Alpert
  • David Powell

Abstract

Influential literatures have exploited tax policy changes to estimate the effects of income taxes on either intensive or extensive margin decisions. We extend this quasi‐experimental approach to jointly estimate intensive and extensive margin tax elasticities to address selection issues that have hindered consistent estimation of labor supply effects. The extensive margin equation provides a way to control for selection in the intensive margin equation while consistent estimation of the intensive margin provides estimates of after‐tax returns to working for nonworkers, a necessary input to study extensive behavioral responses. We apply this approach to study the tax responsiveness of older workers. (JEL C33, H24, J20, J26)

Suggested Citation

  • Abby Alpert & David Powell, 2020. "Estimating Intensive And Extensive Tax Responsiveness," Economic Inquiry, Western Economic Association International, vol. 58(4), pages 1855-1873, October.
    • Handle: RePEc:bla:ecinqu:v:58:y:2020:i:4:p:1855-1873
    DOI: 10.1111/ecin.12893
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    Cited by:

    1. Keane, Michael P., 2022. "Recent research on labor supply: Implications for tax and transfer policy," Labour Economics, Elsevier, vol. 77(C).
    2. Gustafsson, Johan, 2024. "Favorable tax treatment of older workers in general equilibrium," Umeå Economic Studies 1023, Umeå University, Department of Economics.
    3. Ben Brewer & Karen Smith Conway & Jonathan C. Rork, 2022. "Do income tax breaks for the elderly affect economic growth?," Contemporary Economic Policy, Western Economic Association International, vol. 40(1), pages 7-27, January.
    4. Moore, Rachel & Pecoraro, Brandon, 2021. "Quantitative Analysis of a Wealth Tax in the United States: Exclusions, Evasion, and Expenditures," MPRA Paper 109120, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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