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Who wins, who loses? Identification of conditional causal effects, and the welfare impact of changing wages

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  • Kasy, Maximilian

Abstract

The incidence of tax and other policy changes depends on their impact on equilibrium wages. In a standard model of labor supply, the impact of wage changes on a worker’s welfare equals current labor supply times the induced wage change. Worker heterogeneity implies that wage changes vary across workers. In this context, in order to identify welfare effects one needs to identify the causal effect of policy changes on wages conditional on baseline labor supply and wages.

Suggested Citation

  • Kasy, Maximilian, 2022. "Who wins, who loses? Identification of conditional causal effects, and the welfare impact of changing wages," Journal of Econometrics, Elsevier, vol. 226(1), pages 155-170.
    • Handle: RePEc:eee:econom:v:226:y:2022:i:1:p:155-170
    DOI: 10.1016/j.jeconom.2021.02.001
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    More about this item

    Keywords

    Incidence; Identification; Marginal effects; Local average derivatives;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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