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Nonparametric estimation of the impact of taxes on female labor supply

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  • Anil Kumar

Abstract

Econometric models with nonlinear budgets sets frequently arise in the study of impact of taxation on labor supply. Blomquist and Newey (2002) have suggested a nonparametric method to estimate the uncompensated wage and income effects when the budget set is nonlinear. This paper extends their nonparametric estimation method to censored dependent variables. The modified method is applied to estimate female wage and income elasticities using the 1987 PSID. I find evidence of bias if the nonlinearity in the budget set is ignored. The median compensated elasticity is estimated at 1.19 (with a standard error of 0.19).

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Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 0505.

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Date of creation: 2005
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Handle: RePEc:fip:feddwp:05-05

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Keywords: Labor supply ; Women - Employment ; Wages;

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Cited by:
  1. Robert McClelland & Shannon Mok, 2012. "A Review of Recent Research on Labor Supply Elasticities: Working Paper 2012-12," Working Papers 43675, Congressional Budget Office.
  2. Harding, Matthew & Lamarche, Carlos, 2013. "Penalized Quantile Regression with Semiparametric Correlated Effects: Applications with Heterogeneous Preferences," IZA Discussion Papers 7741, Institute for the Study of Labor (IZA).
  3. Liang, Che-Yuan, 2014. "Distribution-Free Structural Estimation with Nonlinear Budget Sets," Working Paper Series, Center for Fiscal Studies 2014:4, Uppsala University, Department of Economics.
  4. Amanda E. Kowalski, 2012. "Estimating the Tradeoff Between Risk Protection and Moral Hazard with a Nonlinear Budget Set Model of Health Insurance," NBER Working Papers 18108, National Bureau of Economic Research, Inc.

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