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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. 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., John Wiley & Sons, Ltd., vol. 19(6), pages 795-807.
  2. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 40(4), pages 1105-1166, December.
  3. Peter Haan & Victoria Prowse & Arne Uhlendorff, 2008. "Employment effects of welfare reforms: Evidence from a dynamic structural life-cycle model," PSE Working Papers, HAL halshs-00586748, HAL.
  4. Paul Frijters & Bas van der Klaauw, 2003. "Job Search with Nonparticipation," School of Economics and Finance Discussion Papers and Working Papers Series, School of Economics and Finance, Queensland University of Technology 168d, School of Economics and Finance, Queensland University of Technology.
  5. John Rust & Christopher Phelan, 1994. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Public Economics, EconWPA 9406005, EconWPA, revised 06 Jul 1994.
  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, University of Chicago Press, vol. 100(3), pages 535-60, June.
  7. Luigi Pistaferri & Hamish Low & Costas Meghir, 2004. "Wage risk and employment risk over the life-cycle," 2004 Meeting Papers, Society for Economic Dynamics 82, Society for Economic Dynamics.
  8. 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.
  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., 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, Oxford University Press, vol. 16(1), pages 27-44, Spring.
  11. 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, IFAU - Institute for Evaluation of Labour Market and Education Policy 2007:27, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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Cited by:
  1. Marco Caliendo & Frank M. Fossen & Alexander S. Kritikos, 2011. "Personality Characteristics and the Decision to Become and Stay Self-Employed," SOEPpapers on Multidisciplinary Panel Data Research 369, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Peter Haan & Victoria Prowse, 2010. "The Design of Unemployment Transfers: Evidence from a Dynamic Structural Life-Cycle Model," Discussion Papers of DIW Berlin 986, DIW Berlin, German Institute for Economic Research.
  3. 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, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 14-027, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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