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Do Workers Know Where Their Tax Dollars Go?

Author

Listed:
  • Karen Smith Conway

    (University of New Hampshire)

Abstract

This research presents a theoretical model that not only allows labor supply to be affected by government spending and taxes, but also permits workers to be aware of the relationship between the two. If individuals value government spending and "know where their taxes are going," wage taxes no longer have the same effect on labor supply as a simple reduction in wages because workers view taxes as "contributions" to public sector goods, which they value. The empirical results for men, using data from the PSID, provide weak support for this "contribution effect."

Suggested Citation

  • Karen Smith Conway, 1995. "Do Workers Know Where Their Tax Dollars Go?," Eastern Economic Journal, Eastern Economic Association, vol. 21(4), pages 505-522, Fall.
    • Handle: RePEc:eej:eeconj:v:21:y:1995:i:4:p:505-522
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume21/V21N4P505_522.pdf
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    More about this item

    Keywords

    Labor Supply;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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