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A Structural Approach to Estimating the Effect of Taxation on the Labor Market Dynamics of Older Workers

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  • Peter Haan
  • Victoria Prowse

Abstract

We estimate a dynamic structural life-cycle model of employment, non-employment and retirement that includes endogenous accumulation of human capital and intertemporal non-separabilities in preferences. Additionally, the model accounts for the effect of the tax and transfer system on work incentives. The structural parameter estimates are used to evaluate the effects of a tax reform targeted at low income individuals on employment behavior and retirement decisions.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.98237.de/diw_sp0185.pdf
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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 185.

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Length: 24 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp185

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Keywords: Life-cycle labor supply; income taxation;

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References

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  1. Paul Frijters & Bas van der Klaauw, 2003. "Job Search with Nonparticipation," School of Economics and Finance Discussion Papers and Working Papers Series 168d, School of Economics and Finance, Queensland University of Technology.
  2. Hamish Low & Costas Meghir & Luigi Pistaferri, 2009. "Wage Risk and Employment Risk over the Life Cycle," NBER Working Papers 14901, National Bureau of Economic Research, Inc.
  3. Victoria Prowse & Peter Haan, 2008. "Employment effects of welfare reforms - Evidence from a dynamic structural life-cycle model," Economics Series Working Papers 391, University of Oxford, Department of Economics.
  4. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers 8983, National Bureau of Economic Research, Inc.
  5. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
  6. Wolpin, Kenneth I, 1992. "The Determinants of Black-White Differences in Early Employment Careers: Search, Layoffs, Quits, and Endogenous Wage Growth," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 535-60, June.
  7. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
  8. Adda, Jérôme & Costa Dias, Mònica & Meghir, Costas & Sianesi, Barbara, 2007. "Labour market programmes and labour market outcomes: a study of the Swedish active labour market interventions," Working Paper Series 2007:27, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  9. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
  10. Blundell, Richard, 2000. "Work Incentives and 'In-Work' Benefit Reforms: A Review," Oxford Review of Economic Policy, Oxford University Press, vol. 16(1), pages 27-44, Spring.
  11. Anders Karlstrom & Marten Palme & Ingemar Svensson, 2004. "A dynamic programming approach to model the retirement behaviour of blue-collar workers in Sweden," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 795-807.
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Cited by:
  1. Marco Caliendo & Frank Fossen & Alexander Kritikos, 2014. "Personality characteristics and the decisions to become and stay self-employed," Small Business Economics, Springer, vol. 42(4), pages 787-814, April.
  2. Bonin, Holger & Schnabel, Reinhold & Stichnoth, Holger, 2014. "Zur Effizienz der ehe- und familienbezogenen Leistungen in Deutschland im Hinblick auf soziale Sicherungs- und Beschäftigungsziele," ZEW Discussion Papers 14-027, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Haan, Peter & Prowse, Victoria, 2010. "The Design of Unemployment Transfers: Evidence from a Dynamic Structural Life-Cycle Model," IZA Discussion Papers 4792, Institute for the Study of Labor (IZA).

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