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The Effect of Income Taxation on Consumption and Labor Supply Author info | Abstract | Publisher info | Download info | Related research | Statistics James P. Ziliak (University of Kentucky)
Thomas J. Kniesner (Syracuse University)
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We estimate the incentive effects of income taxation in a life-cycle model of consumption and labor supply without intratemporal strong separability. We find that consumption and hours worked are direct complements in utility; both increase with a compensated increase in the net wage. The compensated net wage elasticity is about 0.3, nearly double estimates for U.S. men from a linear labor supply specification. Estimated intertemporal elasticities indicate significant intertemporal smoothing of utility. The estimated marginal welfare cost of government revenue is 6%20%, which is about half the estimated welfare cost when additivity between consumption and leisure is incorrectly imposed.
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Article provided by University of Chicago Press in its journal Journal of Labor Economics .
Volume (Year): 23 (2005)
Issue (Month): 4 (October)
Pages: 769-796
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Handle: RePEc:ucp:jlabec:v:23:y:2005:i:4:p:769-796Contact details of provider: Postal: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637 Fax: (773) 753-0811 Email: Web page: http://www.journals.uchicago.edu/JOLE/home.html
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Mathias Trabandt & Harald Uhlig, 2006.
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"Non-Separability, Heterogeneous Labor Supply, Investment, and the Business Cycle ,"
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