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The Incidence of Income Tax on Wages and Labour Supply
NCRR and Economics Department, Århus University, Århus, Denmark. (SFI Copenhagen)
Economics Department, Keele University, Keele, UK.ORCID iD: 0000-0001-9244-7018
2002 (English)In: Journal of Public Economics, ISSN 0047-2727, E-ISSN 1879-2316, Vol. 83, no 2, 173-194 p.Article in journal (Refereed) Published
Abstract [en]

In the simple framework of a static model for equilibrium wages and labour supplies, we show that the incidence of income tax on equilibrium wages can be measured independently from the individual labour supply elasticity. This extends recent work by [Journal of Labour Economics, 15(3) (1997) S72-S101] and [Journal of Public Economics, 65 (1997) 119-145], who estimate tax incidence on earnings, and [Econometrica, 66(4) (1998) 827-861] and [NBER Working Paper 5023 (1995)], who estimate labour supply elasticities, Our measurements are based on a large multi-level longitudinal data set of Danish private sector establishments and workers. We show that, allowing for labour supply response, there is strong evidence for partial shifting of the burden of income tax from worker to employer. Higher marginal tax rates are associated with increases in gross wages and earnings

Place, publisher, year, edition, pages
Elsevier, 2002. Vol. 83, no 2, 173-194 p.
Keyword [en]
tax incidence, labour supply, matched employer-employee panel data
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URN: urn:nbn:se:umu:diva-83518DOI: 10.1016/S0047-2727(01)00080-9ISI: 000174465900002OAI: diva2:668452

Article Number: PII S0047-2727(01)00080-9

Available from: 2013-11-29 Created: 2013-11-29 Last updated: 2014-04-10Bibliographically approved

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Lanot, Gauthier
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