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Distribution-Free Structural Estimation with Nonlinear Budget Sets

Author

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  • Liang, Che-Yuan

    () (Uppsala Center for Fiscal Studies)

Abstract

I develop a structural method for evaluating labor supply in nonlinear budget sets that does not require any distributional assumptions. The model only requires that preferences are convex on the budget frontier. It can be extended to account for features such as fixed costs of work and the stigma cost of welfare participation. It can also be adapted for estimation of earnings, hours of work, and functions that depend on the labor supply distribution, including tax revenue and cumulative distribution functions. The method is applied to estimate the effects of taxes on various labor supply outcomes in the U.S. and Sweden.

Suggested Citation

  • Liang, Che-Yuan, 2014. "Distribution-Free Structural Estimation with Nonlinear Budget Sets," Working Paper Series, Center for Fiscal Studies 2014:4, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uufswp:2014_004
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    File URL: http://ucfs.nek.uu.se/digitalAssets/223/223531_20144.pdf
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    References listed on IDEAS

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    Cited by:

    1. Kumar, Anil & Liang, Che-Yung, 2016. "Estimating Taxable Income Responses with Elasticity Heterogeneity," Working Papers 1611, Federal Reserve Bank of Dallas, revised 02 Mar 2018.

    More about this item

    Keywords

    nonlinear budget sets; structural models; distribution-free estimation; labor supply;

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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