Structural models of the labour market and the impact and design of tax policies
AbstractThis dissertation is concerned with the estimation of structural models of the labour market and the application of these models in both evaluating policy reforms, and exploring their implications for taxation design. The programme that is at the centre of much of the empirical exploration in this thesis is the British Working Families’ Tax Credit (WFTC), which during its lifetime, provided the main form of in-work support for lower income families with children. The first chapter of this thesis estimates a discrete choice hours of work model using data from before and after the introduction of WFTC. To the extent that behavioural responses to tax reforms are informative about preferences, it uses the estimated model directly to explore problems related to the optimal design of the tax and transfer system. It derives new theoretical results and empirically explores the extent to which the tax authorities may wish to condition the tax schedule on age of children. Given the use of hours contingent payments in the UK tax credit system, it also investigates the desirability of including a measure of hours of work in the tax base. The second and third chapters of this thesis firstly develop the methodology, and then consider how our view of programmes such as WFTC is affected once the presence of labour market frictions and the importance of job search activity is acknowledged. In doing so, it greatly extends the empirical equilibrium job search literature. By introducing the monopsonistic behaviour of firms, it considers how these firms may optimally adjust their wages following the introduction of programmes which encourage work, such as WFTC. The equilibrium impact of the reform on a range of outcomes for both WFTC-eligible and non-eligible workers is assessed.
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Bibliographic InfoPaper provided by University College London in its series Open Access publications from University College London with number http://discovery.ucl.ac.uk/20308/.
Date of creation: 28 Jul 2010
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Publication status: Published
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- Martinez-Granado, Maite, 2005.
"Testing labour supply and hours constraints,"
Elsevier, vol. 12(3), pages 321-343, June.
- Martinez-Granado, Maite, . "Testing labour supply and hours constraints," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/6106, Universidad Carlos III de Madrid.
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