Discreteness and the Welfare Cost of Labor Supply Tax Distortions
We discuss the role played by discrete labor supply (leisure consumption) choice in" affecting measures of the welfare cost of labor supply tax distortions. We construct comparable" continuous and discrete choice models, each calibrated to have similar aggregate" (uncompensated) labor supply elasticities. In the former, there is a single representative" consumer; in the latter there is a distribution of individuals across preference parameters. In the" discrete model, taxes induce a large response from a subset of the population of the population shows unchanged behavior. Welfare costs of similar taxes in continuous" models can substantially exceed those in discrete models or vice versa formulation used. Experiments are also reported for a two labor type household model with one" continuous variable (secondary labor) and one discrete variable (primary labor) are also made using an empirically based model specification calibrated to UK data. Model" results clearly show that discrete choice matters in the assessment of the cost of labor supply tax" distortions.
|Date of creation:||Nov 1997|
|Date of revision:|
|Publication status:||published as Bhattarai, Keshab and John Whalley. "Discreteness And The Welfare Cost Of Labor Supply Tax Distortions," International Economic Review, 2003, v44(3,Aug), 1117-1133.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kahn, Shulamit & Lang, Kevin, 1991.
"The Effect of Hours Constraints on Labor Supply Estimates,"
The Review of Economics and Statistics,
MIT Press, vol. 73(4), pages 605-11, November.
- Shulamit Kahn & Kevin Lang, 1988. "The Effects of Hours Constraints on Labor Supply Estimates," NBER Working Papers 2647, National Bureau of Economic Research, Inc.
- John Piggott & John Whalley, 1994.
"The Tax Unit and Household Production,"
NBER Working Papers
4820, National Bureau of Economic Research, Inc.
- Blundell, Richard & Macurdy, Thomas, 1999.
"Labor supply: A review of alternative approaches,"
Handbook of Labor Economics,
in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695
- William T. Dickens & Shelly J. Lundberg, 1985.
"Hours Restrictions and Labor Supply,"
NBER Working Papers
1638, National Bureau of Economic Research, Inc.
- Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
- Cogan, John F, 1981. "Fixed Costs and Labor Supply," Econometrica, Econometric Society, vol. 49(4), pages 945-63, June.
- repec:cup:cbooks:9780521319867 is not listed on IDEAS
- Rosen, Harvey S, 1976. "Taxes in a Labor Supply Model with Joint Wage-Hours Determination," Econometrica, Econometric Society, vol. 44(3), pages 485-507, May.
- Hansen, Gary D., 1985.
"Indivisible labor and the business cycle,"
Journal of Monetary Economics,
Elsevier, vol. 16(3), pages 309-327, November.
- Richard Blundell, 1992. "Labour supply and taxation: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 13(3), pages 15-40, January.
- repec:cup:cbooks:9780521266550 is not listed on IDEAS
- Stewart, Mark B & Swaffield, Joanna K, 1997.
"Constraints on the Desired Hours of Work of British Men,"
Royal Economic Society, vol. 107(441), pages 520-35, March.
- Stewart, M.B. & Swaffield, J.K., 1996. "Constraints on the Desired Hours of Work of British Men," The Warwick Economics Research Paper Series (TWERPS) 468, University of Warwick, Department of Economics.
- Ian Walker & Ian Preston, 1999. "Welfare measurement in labour supply models with nonlinear budget constraints," Journal of Population Economics, Springer, vol. 12(3), pages 343-361.
- Martijn P. Tummers & Isolde Woittiez, 1991. "A Simultaneous Wage and Labor Supply Model with Hours Restrictions," Journal of Human Resources, University of Wisconsin Press, vol. 26(3), pages 393-423.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6280. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.