In the simple framework of a static model for equilibrium wages and labour supplies, we show that the incidence of income tax on equilibrium wages can be measured independently from the individual labour supply elasticity. This extends recent work by Blundell, Duncan and Meghir (1998) and Eissa and Liebman (1996), who estimate labour supply elasticities,and Gruber (1997), who estimates tax incidence on earnings. Our measurements are based on a large multi-level longitudinal data set of Danish private sector establishments. We find strong evidence for partial shifting of the burden of income tax from worker to employer. Higher marginal tax rates are associated with increases in gross wages and earnings. A traditional estimate of the elasticity of labour supply with respect to the net wage, which assumes no shifting of the burden of income tax, is found to overstate incentive effects by a factor of two.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Centre for Labour Market and Social Research, Danmark- in its series Papers with number
99-01.
Length: 24 pages Date of creation: 1999 Date of revision: Handle: RePEc:fth:clmsre:99-01
Contact details of provider: Postal: Danmark; Centre for Labour Market and Social Research. Science Park Aarhus Wieds Vej 10C, 8000 Aarhus C, Danmark Phone: +45 8942 2350 Fax: +45 8942 2365 Email: Web page: http://www.cls.dk/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Thomas Krichel).
Find related papers by JEL classification: H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)