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Labour Supply Prediction When Tax Avoidance Matters

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Author Info

  • Agell, Jonas

    ()
    (Department of economics, Uppsala University)

  • Persson, Mats

    ()
    (Institute for International Economic Studies, Stockholm University)

  • Sacklén, Hans

    (FIEF)

Abstract

We examine how tax avoidance in the form of trade in well-functioning asset markets affects the empirical study of labor supply. We discuss the implications for tax policy analysis, and we show that a failure to account for avoidance re-sponses may lead to huge errors when predicting how tax reform affects labor supply, tax revenue, and the welfare cost of taxation. In conclusion we argue that our model may explain a number of otherwise hard to understand dimen-sions of tax payer response.

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File URL: http://su.diva-portal.org/smash/get/diva2:328479/FULLTEXT01
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Bibliographic Info

Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 679.

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Length: 43 pages
Date of creation: 28 Sep 1999
Date of revision:
Handle: RePEc:hhs:iiessp:0679

Contact details of provider:
Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Phone: +46-8-162000
Fax: +46-8-161443
Web page: http://www.iies.su.se/
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Related research

Keywords: labour supply; tax avoidance; asset markets; tax reform simulation;

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References

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  1. Englund, Peter & Persson, Mats, 1982. "Housing prices and tenure choice with asymmetric taxes and progressivity," Journal of Public Economics, Elsevier, vol. 19(3), pages 271-290, December.
  2. Jonas Agell & Mats Persson, 1998. "Tax Arbitrage and Labor Supply," NBER Working Papers 6708, National Bureau of Economic Research, Inc.
  3. Lang, Oliver & Nohrba[ss], Karl-Heinz & Stahl, Konrad, 1997. "On income tax avoidance: the case of Germany," Journal of Public Economics, Elsevier, vol. 66(2), pages 327-347, November.
  4. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  5. Ziliak, J. & Kniesner, T.J., 1995. "Estimating Life-Cycle Labor Supply tax Effects," Papers 9589, Tilburg - Center for Economic Research.
  6. Blomquist, Soren, 1996. "Estimation methods for male labor supply functions How to take account of nonlinear taxes," Journal of Econometrics, Elsevier, vol. 70(2), pages 383-405, February.
  7. Roger H. Gordon & Joel Slemrod, 1998. "Are "Real" Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?," NBER Working Papers 6576, National Bureau of Economic Research, Inc.
  8. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-59, December.
  9. Joel Slemrod, 2001. "A General Model of the Behavioral Response to Taxation," International Tax and Public Finance, Springer, vol. 8(2), pages 119-128, March.
  10. Aronsson, Thomas & Palme, Marten, 1998. "A Decade of Tax and Benefit Reforms in Sweden: Effects on Labour Supply, Welfare and Inequality," Economica, London School of Economics and Political Science, vol. 65(257), pages 39-67, February.
  11. Heckman, James J, 1993. "What Has Been Learned about Labor Supply in the Past Twenty Years?," American Economic Review, American Economic Association, vol. 83(2), pages 116-21, May.
  12. Martin Feldstein, 1995. "Tax Avoidance and the Deadweight Loss of the Income Tax," NBER Working Papers 5055, National Bureau of Economic Research, Inc.
  13. Triest, Robert K, 1992. "The Effect of Income Taxation on Labor Supply when Deductions Are Endogenous," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 91-99, February.
  14. Agell, Jonas & Edin, Per-Anders, 1990. " Marginal Taxes and the Asset Portfolios of Swedish Households," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(1), pages 47-64.
  15. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
  16. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, December.
  17. repec:fth:stanho:e-90-11 is not listed on IDEAS
  18. Blundell, Richard & Meghir, Costas & Symons, Elizabeth & Walker, Ian, 1988. "Labour supply specification and the evaluation of tax reforms," Journal of Public Economics, Elsevier, vol. 36(1), pages 23-52, June.
  19. Mayshar, Joram, 1991. " Taxation with Costly Administration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(1), pages 75-88.
  20. Richard Blundell, 1992. "Labour supply and taxation: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 13(3), pages 15-40, January.
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Citations

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Cited by:
  1. Assar Lindbeck, 2000. "Pensions and Contemporary Socioeconomic Change," NBER Working Papers 7770, National Bureau of Economic Research, Inc.
  2. Persson, Mats, 2000. "Five Fallacies in the Social Security Debate," Seminar Papers 686, Stockholm University, Institute for International Economic Studies.
  3. Svensson, Lars E O, 2000. "The First Year Of The Eurosystem: Inflation Targeting Or Not?," CEPR Discussion Papers 2380, C.E.P.R. Discussion Papers.
  4. Arai, Mahmood & Skogman Thoursie, Peter, 2001. "Incentives and Selection in Cyclical Absenteeism," Working Paper Series 167, Trade Union Institute for Economic Research.
  5. Strauss, Tove, 2000. "Structural Reforms, Uncertainty, and Private Investment," Working Paper Series 165, Trade Union Institute for Economic Research.
  6. Strauss, Tove, 2000. "Economic Reforms and the Poor," Working Paper Series 164, Trade Union Institute for Economic Research.

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