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Equilibrium Search and Tax Credit Reform

Author

Listed:
  • Andrew Shephard

    (Princeton University)

Abstract

An empirical equilibrium job search model with wage posting is developed to analyze the labor market impact of UK tax reforms. The model allows for a rich characterization of the labor market, with hours responses, accurate representations of the tax and transfer system, and both worker and firm heterogeneity. The model is estimated with pre-reform longitudinal survey data using a semi-parametric estimation technique, and the impact of actual tax reform policies is simulated. The model predicts that the British Working Families? Tax Credit and contemporaneous reforms increased employment, with equilibrium effects found to play a relatively minor role.

Suggested Citation

  • Andrew Shephard, 2011. "Equilibrium Search and Tax Credit Reform," Working Papers 1336, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:223
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    File URL: https://gceps.princeton.edu/wp-content/uploads/2017/01/223shephard.pdf
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    References listed on IDEAS

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    2. Benoit Schmutz & Modibo Sidibé, 2014. "Job Search and Migration in a System of Cities," Working Papers 2014-43, Center for Research in Economics and Statistics.

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    More about this item

    Keywords

    Labour market equilibrium; job search; wage dispersion; unemployment; monopsony; incidence; tax credits; United Kingdom; Great Britain;
    All these keywords.

    JEL classification:

    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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