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Can progressive taxation account for cross-country variation in labor supply?

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  • Koyuncu, Murat

Abstract

The difference between average hours worked in the US and average hours worked in Continental European countries has been increasing since the early 1970s. To explain this phenomenon, this paper develops an endogenous growth model with two key properties: agents are heterogeneous in their rates of time preference and labor skills, and the model incorporates progressive income taxes. The model is calibrated to US and German data for the periods 1971-1974 and 1986-1989. Our findings suggest that the degree of progressivity is a major factor in explaining the patterns of the US and German labor supply over time. Predictions of the model also match the distributional trends in both countries during this time period.

Suggested Citation

  • Koyuncu, Murat, 2011. "Can progressive taxation account for cross-country variation in labor supply?," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1474-1488, September.
  • Handle: RePEc:eee:dyncon:v:35:y:2011:i:9:p:1474-1488
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    References listed on IDEAS

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    Cited by:

    1. Üngör, Murat, 2014. "Some thought experiments on the changes in labor supply in Turkey," Economic Modelling, Elsevier, vol. 39(C), pages 265-272.
    2. repec:bla:scandj:v:121:y:2019:i:3:p:1270-1302 is not listed on IDEAS
    3. Brecht Boone & Freddy Heylen, 2019. "Cross‐Country Differences in Unemployment: Fiscal Policy, Unions, and Household Preferences in General Equilibrium," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1270-1302, July.
    4. Willem Devriendt & Freddy Heylen, 2017. "Macroeconomic and distributional effects of demographic change in an open economy - The case of Belgium -," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 17/931, Ghent University, Faculty of Economics and Business Administration.
    5. Willem Devriendt & Freddy Heylen, 2018. "Coping With Demographic Change: Macroeconomic Performance And Welfare Inequality Effects Of Public Pension Reform," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 18/948, Ghent University, Faculty of Economics and Business Administration.
    6. Li, Chengjian & Lin, Shuanglin, 2015. "Tax progressivity and tax incidence of the rich and the poor," Economics Letters, Elsevier, vol. 134(C), pages 148-151.

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