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Abstract

Tax Liability Side Equivalence (tax LSE) claims that the statutory incidence of a tax is irrelevant for its economic incidence. In gift-exchange labor markets, firms provide a gift to workers by paying high wages, and workers reciprocate by providing high efforts. Tax LSE is theoretically predicted to hold in gift-exchange markets if workers' effort choices exclusively depend on the net wage, but breaks down if they partially depend on the gross wage paid to workers. We experimentally test tax LSE in a gift-exchange market and find that it holds surprisingly well.

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Bibliographic Info

Paper provided by Maastricht University in its series Open Access publications from Maastricht University with number urn:nbn:nl:ui:27-16452.

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Date of creation: 2005
Date of revision:
Publication status: Published in Journal of public economics (2005) v.89, p.2369-2382
Handle: RePEc:ner:maastr:urn:nbn:nl:ui:27-16452

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Web page: http://www.maastrichtuniversity.nl/web/Home.htm

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Find related papers by JEL classification:

• C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
• H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
• J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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11. Fehr, Ernst & Kirchsteiger, Georg & Riedl, Arno, 1993. "Does fairness prevent market clearing? An experimental investigation," Open Access publications from Maastricht University urn:nbn:nl:ui:27-16460, Maastricht University.
    
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Cited by:

1. Rupert Sausgruber & Jean-Robert Tyran, 2008. "Tax Salience, Voting, and Deliberation," Working Papers 2009-25, Faculty of Economics and Statistics, University of Innsbruck.
   
   • Rupert Sausgruber & Jean-Robert Tyran, 2008. "Tax Salience, Voting, and Deliberation," Discussion Papers 08-21, University of Copenhagen. Department of Economics.
   • Rupert Sausgruber & Jean-Robert Tyran, 2009. "Tax Salience, Voting, and Deliberation," NRN working papers 2009-25, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
2. Blumkin, Tomer & Ruffle, Bradley J. & Ganun, Yosef, 2012. "Are income and consumption taxes ever really equivalent? Evidence from a real-effort experiment with real goods," European Economic Review, Elsevier, vol. 56(6), pages 1200-1219.
   
   • Tomer Blumkin & Bradley J. Ruffle & Yosef Ganun, 2008. "Are Income and Consumption Taxes Ever Really Equivalent? Evidence from a Real-Effort Experiment with Real Goods," Working Papers 0801, Ben-Gurion University of the Negev, Department of Economics.
   • Tomer Blumkin & Bradley J. Ruffle & Yosef Ganun, 2008. "Are Income and Consumption Taxes ever really Equivalent? Evidence from a Real-Effort Experiment with Real Goods," CESifo Working Paper Series 2194, CESifo Group Munich.
   • Blumkin, Tomer & Ruffle, Bradley J. & Ganun, Yosef, 2007. "Are Income and Consumption Taxes Ever Really Equivalent? Evidence from a Real-Effort Experiment with Real Goods," MPRA Paper 6479, University Library of Munich, Germany.
   • Blumkin, Tomer & Ruffle, Bradley & Ganun, Yosef, 2010. "Are Income and Consumption Taxes Ever Really Equivalent? Evidence from a Real-Effort Experiment with Real Goods," IZA Discussion Papers 5145, Institute for the Study of Labor (IZA).
3. Paul J. Healy, 2007. "Group Reputations, Stereotypes, and Cooperation in a Repeated Labor Market," American Economic Review, American Economic Association, vol. 97(5), pages 1751-1773, December.
   
   • Paul Healy, . "Group Reputations, Stereotypes, and Cooperation in a Repeated Labor Market," GSIA Working Papers 2006-E6, Carnegie Mellon University, Tepper School of Business.
4. Casoria Fortuna & Riedl Arno, 2012. "Experimental labor markets and policy considerations: Incomplete contracts and macroeconomic aspects," Research Memoranda 058, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
   
   • Casoria, Fortuna & Riedl, Arno, 2012. "Experimental Labor Markets and Policy Considerations: Incomplete Contracts and Macroeconomic Aspects," IZA Discussion Papers 7102, Institute for the Study of Labor (IZA).
5. Konrad, Kai A. & Morath, Florian & Müller, Wieland, 2010. "Taxation and market power," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2010-07, Social Science Research Center Berlin (WZB).
   
   • Konrad, K.A. & Morath, F. & Müller, W., 2010. "Taxation and Market Power," Discussion Paper 2010-03, Tilburg University, Center for Economic Research.
   • Kai A. Konrad & Florian Morath & Wieland Müller, 2009. "Taxation and Market Power," CESifo Working Paper Series 2880, CESifo Group Munich.
6. Sausgruber, Rupert & Tyran, Jean-Robert, 2011. "Are we taxing ourselves?," Journal of Public Economics, Elsevier, vol. 95(1), pages 164-176.
7. Arno Riedl, 2009. "Behavioral and Experimental Economics Can Inform Public Policy: Some Thoughts," CESifo Working Paper Series 2902, CESifo Group Munich.
8. Bracht, Juergen & Feltovich, Nick, 2009. "Whatever you say, your reputation precedes you: Observation and cheap talk in the trust game," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1036-1044, October.
9. Ben Heijdra & Jenny Ligthart, 2009. "Labor tax reform, unemployment, and search," International Tax and Public Finance, Springer, vol. 16(1), pages 82-104, February.

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