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Distortionary Taxation and Labor Supply: Evidence from Canada

Author

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  • CARDIA, Emanuela
  • KOZHAYA, Norma
  • RUGE-MURCIA, Francisco J.

Abstract

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.

Suggested Citation

  • CARDIA, Emanuela & KOZHAYA, Norma & RUGE-MURCIA, Francisco J., 1999. "Distortionary Taxation and Labor Supply: Evidence from Canada," Cahiers de recherche 9913, Universite de Montreal, Departement de sciences economiques.
  • Handle: RePEc:mtl:montde:9913
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    File URL: http://hdl.handle.net/1866/477
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    References listed on IDEAS

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    More about this item

    Keywords

    labor taxation; labor suly; cointegration; Canada;

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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