The Effects of Taxes on Aggregate Labor: A Cross-Country General-Equilibrium Study
At empirically reasonable labor supply elasticities, equilibrium models of public finance predict that greater taxes in a country should lead to lower aggregate labor. The authors examine data from a cross-section of twenty-two OECD economies for such a relationship. The approach is to estimate parameters of a static general-equilibrium model of aggregate labor. Greater taxes do appear to reduce equilibrium labor in the authors' sample. Indeed, estimated aggregate wage elasticities are generally greater than consensus estimates from traditional studies of cross sections of individuals. Copyright 1993 by The editors of the Scandinavian Journal of Economics.
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Volume (Year): 95 (1993)
Issue (Month): 3 ()
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