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Heterogeneity in Income Tax Incidence Are the Wages of Dangerous Jobs More Responsive to Tax Changes than the Wages of Safe Jobs?

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  • David Powell

Abstract

Income taxes distort the relationship between wages and non-taxable amenities. When the marginal tax rate increases, amenities become more valuable as the compensating differential for low-amenity jobs is taxed away. While there is evidence that the provision of amenities responds to taxes, the literature has ignored the consequences for job characteristics which cannot fully-adjust. This paper compares the wage response of dangerous jobs to the wage response of safe jobs. When tax rates increase, we should see the pre-tax compensating differential for on-the-job risk increase. Empirically, this paper finds large differences in the wage response of jobs based on their riskiness.

Suggested Citation

  • David Powell, 2011. "Heterogeneity in Income Tax Incidence Are the Wages of Dangerous Jobs More Responsive to Tax Changes than the Wages of Safe Jobs?," Working Papers WR-706-1, RAND Corporation.
    • Handle: RePEc:ran:wpaper:wr-706-1
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    References listed on IDEAS

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    More about this item

    Keywords

    income taxes; value of a statistical life; tax incidence; compensating differentials;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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