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Taxes, Fringe Benefits and Faculty

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  • Daniel S. Hamermesh
  • Stephen A. Woodbury

Abstract

The growth of employee benefits in academe has closely paralleled their economy-wide growth. This study estimates a complete system describing the demand for benefits and wages using panel data on nearly 1500 institutions of higher learning. The demand for benefits is quite responsive both to changes in real income and to variations in the tax price of benefits. These conclusions are robust with respect to varying definitions of the sample aid of the tax price. They are not altered by estimates that account for unmeasured individual effects on demand. Simulations using the estimates suggest that the Tax Reform Act of 1986 sharply reduced the demand for benefits. Extrapolating the impact to the entire economy suggests that the annual flow of compensation shifted away from benefits by at least $9 billion.

Suggested Citation

  • Daniel S. Hamermesh & Stephen A. Woodbury, 1990. "Taxes, Fringe Benefits and Faculty," NBER Working Papers 3455, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3455
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    References listed on IDEAS

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    1. Woodbury, Stephen A, 1983. "Substitution between Wage and Nonwage Benefits," American Economic Review, American Economic Association, vol. 73(1), pages 166-182, March.
    2. Edward C. Kokkelenberg & Donna R. Sockell, 1985. "Union Membership in the United States, 1973–1981," ILR Review, Cornell University, ILR School, vol. 38(4), pages 497-543, July.
    3. Barro, Robert J & Sahasakul, Chaipat, 1983. "Measuring the Average Marginal Tax Rate from the Individual Income Tax," The Journal of Business, University of Chicago Press, vol. 56(4), pages 419-452, October.
    4. Debra A. Barbezat, 1989. "The Effect of Collective Bargaining on Salaries in Higher Education," ILR Review, Cornell University, ILR School, vol. 42(3), pages 443-455, April.
    5. Ichniowski, Casey & Freeman, Richard B & Lauer, Harrison, 1989. "Collective Bargaining Laws, Threat Effects, and the Determination of Police Compensation," Journal of Labor Economics, University of Chicago Press, vol. 7(2), pages 191-209, April.
    6. Richard B. Freeman, 1978. "Should We Organize? Effects of Faculty Unionism on Academic Compensation," NBER Working Papers 0301, National Bureau of Economic Research, Inc.
    7. Long, James E & Scott, Frank A, 1982. "The Income Tax and Nonwage Compensation," The Review of Economics and Statistics, MIT Press, vol. 64(2), pages 211-219, May.
    8. Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486.
    9. Charles T. Clotfelter, 1985. "Federal Tax Policy and Charitable Giving," NBER Books, National Bureau of Economic Research, Inc, number clot85-1, April.
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    Citations

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    Cited by:

    1. Richard Burkhauser & Shuaizhang Feng & Stephen Jenkins & Jeff Larrimore, 2009. "Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data," Working Papers 09-26, Center for Economic Studies, U.S. Census Bureau.
    2. William M. Gentry & Eric Peress, 1994. "Taxes and Fringe Benefits Offered by Employers," NBER Working Papers 4764, National Bureau of Economic Research, Inc.
    3. Jonathan Gruber & James M. Poterba, 1996. "Tax Subsidies to Employer-Provided Health Insurance," NBER Chapters,in: Empirical Foundations of Household Taxation, pages 135-168 National Bureau of Economic Research, Inc.
    4. Sewell, David, 1997. "Shifting responsibility for social services as enterprises privatize in Belarus," Policy Research Working Paper Series 1719, The World Bank.
    5. Leslie E. Papke, 1995. "Participation in and Contributions to 401(k) Pension Plans: Evidence from Plan Data," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 311-325.
    6. Jonathan Gruber & Michael Lettau, 2000. "How Elastic is the Firm's Demand for Health Insurance?," NBER Working Papers 8021, National Bureau of Economic Research, Inc.
    7. Tuuli Juurikkala & Olga Lazareva, 2012. "Non‐wage benefits, costs of turnover and labour attachment," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 20(1), pages 113-136, January.
    8. Jonathan Gruber, 1998. "Health Insurance and the Labor Market," NBER Working Papers 6762, National Bureau of Economic Research, Inc.
    9. Melissa A. Thomasson, 2003. "The Importance of Group Coverage: How Tax Policy Shaped U.S. Health Insurance," American Economic Review, American Economic Association, vol. 93(4), pages 1373-1384, September.
    10. Daniel R. Feenberg & James M. Poterba, 1993. "Income Inequality and the Incomes of Very High-Income Taxpayers: Evidence from Tax Returns," NBER Chapters,in: Tax Policy and the Economy, Volume 7, pages 145-177 National Bureau of Economic Research, Inc.
    11. Jonathan Gruber & James M. Poterba, 1993. "Tax Incentives and the Decision to Purchase Health Insurance: Evidence from the Self-Employed," NBER Working Papers 4435, National Bureau of Economic Research, Inc.
    12. Harley Frazis & Mark A. Loewenstein, 2009. "How Responsive are Quits to Benefits?," Working Papers 426, U.S. Bureau of Labor Statistics.
    13. Douglas Holtz-Eakin, "undated". "Job-Lock: An Impediment to Labor Mobility? Is Health Insurance Crippling the Labor Market?," Economics Public Policy Brief Archive 10, Levy Economics Institute.
    14. Voßmerbäumer, Jan & Wagner, Franz W., 2013. "Steuerwirkungen betrieblicher Entgeltpolitik," arqus Discussion Papers in Quantitative Tax Research 144, arqus - Arbeitskreis Quantitative Steuerlehre.
    15. Douglas Holtz-Eakin, 1993. "Is Health Insurance Crippling the Labor Market?," Economics Working Paper Archive wp_97, Levy Economics Institute.
    16. Jonathan Gruber, 2002. "Taxes and Health Insurance," NBER Chapters,in: Tax Policy and the Economy, Volume 16, pages 37-66 National Bureau of Economic Research, Inc.
    17. Tuuli Juurikkala & Olga Lazareva, 2006. "Non-wage benefits, costs of turnover, and labor attachment: evidence from Russian firms," Working Papers w0062, Center for Economic and Financial Research (CEFIR).
    18. Gruber, Jonathan & Lettau, Michael, 2004. "How elastic is the firm's demand for health insurance?," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1273-1293, July.
    19. Power, Laura & Rider, Mark, 2002. "The effect of tax-based savings incentives on the self-employed," Journal of Public Economics, Elsevier, vol. 85(1), pages 33-52, July.
    20. Douglas Holtz-Eakin, 1994. "Health Insurance Provision and Labor Market Efficiency in the United States and Germany," NBER Chapters,in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 157-188 National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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