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A Non-Singular Peaked Laffer Curve: Debunking the Traditional Laffer Curve

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  • Uriel Spiegel
  • Joseph Templeman

Abstract

This paper has two purposes: first, to demonstrate a utility function of consumption and leisure that leads to a backward-bending supply of labor. The second purpose is to show that in spite of the fact that a Laffer curve of any individual in a society may have one-peak point where tax revenue is at its maximum, the aggregate (macro) Laffer curve is very likely to have multi (or at least dual) peaks. This is caused by the high degree of inequality in wage distribution in most western countries.

Suggested Citation

  • Uriel Spiegel & Joseph Templeman, 2004. "A Non-Singular Peaked Laffer Curve: Debunking the Traditional Laffer Curve," The American Economist, Sage Publications, vol. 48(2), pages 61-66, October.
    • Handle: RePEc:sae:amerec:v:48:y:2004:i:2:p:61-66
    DOI: 10.1177/056943450404800205
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    References listed on IDEAS

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    1. Stuart, Charles E, 1981. "Swedish Tax Rates, Labor Supply, and Tax Revenues," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1020-1038, October.
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    3. Gahvari, Firouz, 1988. "Does the Laffer Curve Ever Slope Down?," National Tax Journal, National Tax Association, vol. 41(2), pages 267-69, June.
    4. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    5. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-572, June.
    6. Link, Charles R & Settle, Russell F, 1981. "Wage Incentives and Married Professional Nurses: A Case of Backward-Bending Supply?," Economic Inquiry, Western Economic Association International, vol. 19(1), pages 144-156, January.
    7. Kent Matthews, 2003. "VAT Evasion and VAT Avoidance: Is there a European Laffer curve for VAT?," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 105-114.
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    Cited by:

    1. Hugo Pinto-de-Abreu & Elísio Brandão & Samuel Pereira, 2015. "Across Tax Mountains Assessing the Impact of Competition on the Laffer Curve," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 4(1), pages 57-84.

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