Evaluation of tax reforms when workers have preferences over job attributes and face latent choice restrictions
AbstractThis paper analyzes the properties of a particular sectoral labor supply model developed and estimated in Dagsvik and Strøm (2006). Agents have preferences over sectors and latent job attributes. Moreover, the model allows for a representation of the individual choice sets of feasible jobs in the economy. The properties of the model are explored by calculating elasticities and through simulations of the effects of particular tax reforms. The overall wage elasticities are rather small, but these small elasticities shadow for much stronger sectoral responses. An overall wage increase and, of course, a wage increase in the private sector only, gives women an incentive to shift their labor supply from the public to the private sector. Marginal tax rates were cut considerably in the 1992 tax reform. We find that the impact on overall labor supply is rather modest, but again these modest changes shadow for stronger sectoral changes. The tax reform stimulated the women to shift their labor from the public to the private sector and to work longer hours. A calculation of mean compensated variation shows that the richest households benefited far more from the 1992 tax reform than did the poorest households
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Bibliographic InfoPaper provided by University of Turin in its series Department of Economics and Statistics Cognetti de Martiis. Working Papers with number 200706.
Length: 41 pages
Date of creation: Jul 2007
Date of revision:
Other versions of this item:
- John K. Dagsvik & S. Strøm & Marilena Locatelli, 2007. "Evaluation of tax reforms when workers have preferences over job attributes and face latent choice restrictions," CHILD Working Papers wp13_07, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-20 (All new papers)
- NEP-DCM-2007-07-20 (Discrete Choice Models)
- NEP-LAB-2007-07-20 (Labour Economics)
- NEP-PBE-2007-07-20 (Public Economics)
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