This paper examines empirically the effects of distortionary taxation on labor supply using a general equilibrium framework. The long-term relations predicted by the model are derived and tested using Canadian data between 1966 and 1993. While the cointegrating predictions of the model without taxation are rejected, the ones of the model with labor taxation are not. Persistent labor tax rate increases appear to play an important role in the observed downward trend in hours worked.
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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number
9913.
Find related papers by JEL classification: J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General