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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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  • Haan, Peter

    ()
    (DIW Berlin)

  • Prowse, Victoria L.

    ()
    (Cornell University)

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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4102.

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Length: 27 pages
Date of creation: Mar 2009
Date of revision:
Publication status: published in: Econometrics Journal, 2010, 13 (3), S99 - S125
Handle: RePEc:iza:izadps:dp4102

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Keywords: life-cycle labor supply; income taxation;

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References

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  1. 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, University of Wisconsin Press, vol. 24(4), pages 562-598.
  2. Hamish Low & Costas Meghir & Luigi Pistaferri, 2009. "Wage Risk and Employment Risk over the Life Cycle," NBER Working Papers, National Bureau of Economic Research, Inc 14901, National Bureau of Economic Research, Inc.
  3. Peter Haan & Victoria Prowse & Arne Uhlendorff, 2008. "Employment Effects of Welfare Reforms: Evidence from a Dynamic Structural Life-Cycle Model," Discussion Papers of DIW Berlin, DIW Berlin, German Institute for Economic Research 790, DIW Berlin, German Institute for Economic Research.
  4. Paul Frijters & Bas van der Klaau, 2003. "Job Search with Nonparticipation," Paul Frijters Discussion Papers, School of Economics and Finance, Queensland University of Technology 2003-3, School of Economics and Finance, Queensland University of Technology.
  5. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, Econometric Society, vol. 65(4), pages 781-832, July.
  6. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers, National Bureau of Economic Research, Inc 8983, National Bureau of Economic Research, Inc.
  7. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
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Cited by:
  1. 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.
  2. Caliendo, Marco & Fossen, Frank M. & Kritikos, Alexander S., 2011. "Personality characteristics and the decision to become and stay self-employed," Discussion Papers, Free University Berlin, School of Business & Economics 2011/9, Free University Berlin, School of Business & Economics.
  3. Peter Haan & Victoria Prowse, 2010. "The Design of Unemployment Transfers: Evidence from a Dynamic Structural Life-Cycle Model," Discussion Papers of DIW Berlin, DIW Berlin, German Institute for Economic Research 986, DIW Berlin, German Institute for Economic Research.

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