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Distortionary Taxation and Labor Supply: Evidence from Canada

Listed author(s):
  • CARDIA, Emanuela
  • KOZHAYA, Norma
  • RUGE-MURCIA, Francisco J.

This paper examines empirically the effects of distortionary taxation on labor supply using a general equilibrium framework. The long-term relations predicted by the model are derived and tested using Canadian data between 1966 and 1993. While the cointegrating predictions of the model without taxation are rejected, the ones of the model with labor taxation are not. Persistent labor tax rate increases appear to play an important role in the observed downward trend in hours worked.

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File URL: http://hdl.handle.net/1866/477
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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 9913.

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Length: 33 pages
Date of creation: 1999
Handle: RePEc:mtl:montde:9913
Contact details of provider: Postal:
CP 6128, Succ. Centre-Ville, Montréal, Québec, H3C 3J7

Phone: (514) 343-6540
Fax: (514) 343-5831
Web page: http://www.sceco.umontreal.ca

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  20. Gonzalo, Jesus & Lee, Tae-Hwy, 1998. "Pitfalls in testing for long run relationships," Journal of Econometrics, Elsevier, vol. 86(1), pages 129-154, June.
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  24. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
  25. Trostel, Philip A., 1993. "The nonequivalence between deficits and distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 207-227, April.
  26. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
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