Advanced Search
MyIDEAS: Login to save this article or follow this journal

Regulation and taxation: A complementarity

Contents:

Author Info

  • Schoefer, Benjamin
Registered author(s):

    Abstract

    I show how quantity regulation can lower elasticities and thereby increase optimal tax rates. Such regulation imposes regulatory incentives for particular choice quantities. Their strength varies between zero (laissez faire) and infinite (command economy). In the latter case, regulation effectively eliminates any intensive behavioral responses to taxes; a previously distortionary tax becomes a lump sum. For intermediate regulation (where some deviation is feasible), intensive behavioral responses are still weaker than under zero regulation, and so quantity regulation reduces elasticities, thereby facilitating subsequent taxation. I apply this mechanism to labor supply and present correlational evidence for this complementarity: hours worked in high-regulation countries are compressed, and these countries tax labor at higher rates.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/B6WHV-50M6XGB-1/2/8e3980db3a49b7b0cc9f5287c789c58e
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Comparative Economics.

    Volume (Year): 38 (2010)
    Issue (Month): 4 (December)
    Pages: 381-394

    as in new window
    Handle: RePEc:eee:jcecon:v:38:y:2010:i:4:p:381-394

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/inca/622864

    Related research

    Keywords: Regulation Taxation The scope of government;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Juan Botero, 2003. "The Regulation of Labor," NBER Working Papers 9756, National Bureau of Economic Research, Inc.
    2. Lawrence H. Summers & Jonathan Gruber & Rodrigo Vergara, 1992. "Taxation and the Structure of Labor Markets: The Case of Corporatism," NBER Working Papers 4063, National Bureau of Economic Research, Inc.
    3. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, Elsevier, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421 Elsevier.
    4. Edward L. Glaeser & Andrei Shleifer, 2001. "Legal Origins," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1920, Harvard - Institute of Economic Research.
    5. Emmanuel Saez, 2000. "Using Elasticities to Derive Optimal Income Tax Rates," NBER Working Papers 7628, National Bureau of Economic Research, Inc.
    6. Mankiw, N. Gregory & Weinzierl, Matthew Charles & Yagan, Danny Ferris, 2009. "Optimal Taxation in Theory and Practice," Scholarly Articles 4263739, Harvard University Department of Economics.
    7. Alberto Alesina & Edward L. Glaeser & Bruce Sacerdote, 2005. "Work and Leisure in the U.S. and Europe: Why So Different?," NBER Working Papers 11278, National Bureau of Economic Research, Inc.
    8. Andrei Shleifer, 2005. "Understanding Regulation," European Financial Management, European Financial Management Association, European Financial Management Association, vol. 11(4), pages 439-451.
    9. Louis Kaplow & Steven Shavell, 1997. "On the Superiority of Corrective Taxes to Quantity Regulation," NBER Working Papers 6251, National Bureau of Economic Research, Inc.
    10. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 41(4), pages 477-91, October.
    11. Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
    12. Raj Chetty & John N. Friedman & Tore Olsen & Luigi Pistaferri, 2010. "Adjustment Costs, Firm Responses, and Labor Supply Elasticities: Evidence from Danish Tax Records," CAM Working Papers, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics 2010-03, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    13. Slemrod, Joel & Kopczuk, Wojciech, 2002. "The optimal elasticity of taxable income," Journal of Public Economics, Elsevier, Elsevier, vol. 84(1), pages 91-112, April.
    14. Diamond, P., 1994. "Optimal Income Taxation: An Exemple with a U-Shaped Pattern of Optimal Marginal Tax Rates," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 94-14, Massachusetts Institute of Technology (MIT), Department of Economics.
    15. Diamond, P., 1980. "Income taxation with fixed hours of work," Journal of Public Economics, Elsevier, Elsevier, vol. 13(1), pages 101-110, February.
    16. Spence, Michael, 1977. "Nonlinear prices and welfare," Journal of Public Economics, Elsevier, Elsevier, vol. 8(1), pages 1-18, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:jcecon:v:38:y:2010:i:4:p:381-394. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.