Estimating the welfare cost of taxation in a labour market with Unemployment and non-participation
The standard public finance analysis of the welfare cost of labour income taxation is based on the estimation of labour supply functions that treat unemployed individuals as non-participants. This paper applies econometric models of multinomial discrete choice to the labour market, explicitly allowing individuals to be in any of three possible states (employment, unemployment and non-participation). Based on these estimates, we present calculations of the dead-weight loss of taxes, which turn out to be much larger than those suggested by the standard literature.
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| Length: | |
| Date of creation: | Feb 1999 |
| Handle: | RePEc:ucn:wpaper:199902 |
| Contact details of provider: | Postal: UCD, Belfield, Dublin 4 Phone: +353-1-7067777 Fax: +353-1-283 0068 Web page: http://www.ucd.ie/economics More information through EDIRC
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References listed on IDEAS
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- John C. Ham, 1982. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," Review of Economic Studies, Oxford University Press, vol. 49(3), pages 335-354.
- Small, Kenneth A & Rosen, Harvey S, 1981.
"Applied Welfare Economics with Discrete Choice Models,"
Econometrica,
Econometric Society, vol. 49(1), pages 105-130, January.
- Harvey S. Rosen & Kenneth A. Small, 1979. "Applied Welfare Economics with Discrete Choice Models," NBER Working Papers 0319, National Bureau of Economic Research, Inc.
- Stephen R. G. Jones & W. Craig Riddell, 1999. "The Measurement of Unemployment: An Empirical Approach," Econometrica, Econometric Society, vol. 67(1), pages 147-162, January.
- Stephen R. G. Jones & W. Craig Riddell, "undated". "The Measurement Of Unemployment: An Empirical Approach," Canadian International Labour Network Working Papers 09, McMaster University.
- Keane, Michael P, 1992. "A Note on Identification in the Multinomial Probit Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 193-200, April.
- Mroz, Thomas A, 1987. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, Econometric Society, vol. 55(4), pages 765-799, July.
- Thomas Mroz, "undated". "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," University of Chicago - Population Research Center 84-8, Chicago - Population Research Center.
- Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238. Full references (including those not matched with items on IDEAS)
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