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Labor Supply Responses to the 1990s Japanese Tax Reforms

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  • Ken Yamada

    (Singapore Management University)

Abstract

The consumption-leisure choice model implies that an exogenous change in tax rates will bring about a change in labor supply. This implication is expected to be important to labor supplied by secondary earners under a progressive tax system when spousal income alters effective marginal tax rates. This paper examines labor supply responses to the income tax changes associated with Japanese tax reforms during the 1990s. Empirical specifications are presented in a way that is consistent with a life-cycle model of consumption and labor supply. A simple solution is applied to the sample-selection problem in panel data models with endogenous regressors. The results indicate that the hours-of-work elasticity with respect to the net-of-tax rate is 0.8 for married women.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Labor Economics Working Papers with number 23047.

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Date of creation: Jan 2009
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Handle: RePEc:eab:laborw:23047

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Keywords: Labor Supply Elasticity; Intertemporal Labor Supply Model; Sample-Selection Correction Model; Quasi-Experiment; Tax Reforms;

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Cited by:
  1. ASANO Hirokatsu & ITO Takahiro & KAWAGUCHI Daiji, 2011. "Why Has the Fraction of Contingent Workers Increased? A case study of Japan," Discussion papers 11021, Research Institute of Economy, Trade and Industry (RIETI).

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