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Taxation, Wage Variation, and Job Choice

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  • Brown, James N
  • Rosen, Harvey S

Abstract

This paper examines the effect of earnings taxes on wage variability over t ime. The authors estimate a "hedonic wage locus" which indicates ho w the market allows individuals to substitute the mean level of the w age for its variability across jobs. Information from this locus is u sed to estimate the parameters of individuals' indifference curves be tween the mean and temporal variation of hourly wages. On the basis o f these utility-function parameters, they predict that lowering the r ate of taxation on earnings would on average lead workers to choose j obs with slightly lower pretax mean wages and with less pretax wage v ariation. Copyright 1987 by University of Chicago Press.

Suggested Citation

  • Brown, James N & Rosen, Harvey S, 1987. "Taxation, Wage Variation, and Job Choice," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 430-451, October.
    • Handle: RePEc:ucp:jlabec:v:5:y:1987:i:4:p:430-51
    DOI: 10.1086/298156
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    Cited by:

    1. Sarah Brown & Aurora Ortiz‐Nuñez & Karl Taylor, 2012. "Parental Risk Attitudes and Children's Academic Test Scores: Evidence from the US P anel S tudy of I ncome D ynamics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(1), pages 47-70, February.
    2. Shaw, Kathryn L, 1996. "An Empirical Analysis of Risk Aversion and Income Growth," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 626-653, October.
    3. Sarah Brown & Karl Taylor, 2006. "Education, Risk Preference and Wages," Working Papers 2006002, The University of Sheffield, Department of Economics, revised Feb 2006.

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