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The effects of progressive income taxation on job turnover

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  • Gentry, William M.
  • Hubbard, R. Glenn

Abstract

We examine whether the level of the income tax rate and the convexity of the income tax schedule affect job mobility, as measured by moving to a better job. While the predicted effect of the level of the tax rate is ambiguous, we predict that an increase in the convexity of the tax schedule decreases job search activity by taxing away some of the benefits of a successful job search. Using data from the Panel Study of Income Dynamics, we estimate that both higher tax rates and increased tax rate progressivity decrease the probability that a head of household will move to a better job during the coming year. Our estimates imply that a five-percentage-point reduction in the marginal tax rate increases the average probability of moving to a better job by 0.79 percentage points (a 8.0 percent increase in the turnover propensity) and that a onestandard- deviation in our measure of tax progressivity would increase this probability by 0.86 percentage points (a 8.7 percent increase in the turnover propensity).

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Bibliographic Info

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

Volume (Year): 88 (2004)
Issue (Month): 11 (September)
Pages: 2301-2322

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Handle: RePEc:eee:pubeco:v:88:y:2004:i:11:p:2301-2322

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Web page: http://www.elsevier.com/locate/inca/505578

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Cited by:
  1. Heinz Handler & Andreas Knabe & Bertrand Koebel & Margit Schratzenstaller & Sven Wehke, 2005. "The Impact of Public Budgets on Overall Productivity Growth," WIFO Working Papers 255, WIFO.
  2. Richard Kneller & Danny McGowan, . "Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries," Discussion Papers 11/08, University of Nottingham, School of Economics.
  3. Anca Cotet, 2009. "Death And Taxes: The Impact Of Progressive Taxation On Health," Working Papers 200903, Ball State University, Department of Economics, revised Mar 2009.
  4. repec:ebl:ecbull:v:8:y:2005:i:5:p:1-6 is not listed on IDEAS
  5. Stuart Adam & Mike Brewer & Andrew Shephard, 2006. "Financial work incentives in Britain: comparisons over time and between family types," IFS Working Papers W06/20, Institute for Fiscal Studies.
  6. Mina Baliamoune-Lutz & Pierre Garello, 2014. "Tax structure and entrepreneurship," Small Business Economics, Springer, vol. 42(1), pages 165-190, January.
  7. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
  8. Richard Kneller & Danny McGowan, 2011. "Entrepreneurship Dynamics, Market Size and Fiscal Policy," Working Papers 11003, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  9. Jason Taylor & Christopher Bailey, 2005. "Preferences for Government Size and their Effect on Labor-Leisure Decisions," Economics Bulletin, AccessEcon, vol. 8(5), pages 1-6.
  10. Andrew Shephard, 2011. "Equilibrium Search and Tax Credit Reform," Working Papers 1336, Princeton University, Department of Economics, Center for Economic Policy Studies..

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