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Estimating Labor Supply Responses Using Tax Reforms

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  • Richard Blundell
  • Alan Duncan
  • Costas Meghir

Abstract

The 1980s tax reforms and the changing dispersion of wages offer one of the best opportunities yet to estimate labor supply effects. Nevertheless, changing sample composition, aggregate shocks, the changing composition of the tax paying population, and discontinuities in the tax system create serious identification and estimation problems. The authors develop grouping estimators that address these issues. Their results reveal positive and moderately sized wage elasticities. The authors also find negative income effects for women with children.

Suggested Citation

  • Richard Blundell & Alan Duncan & Costas Meghir, 1998. "Estimating Labor Supply Responses Using Tax Reforms," Econometrica, Econometric Society, vol. 66(4), pages 827-862, July.
    • Handle: RePEc:ecm:emetrp:v:66:y:1998:i:4:p:827-862
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