Abstract
We present an econometrically tractable life cycle labor supply model for panel data including intertemporally progressive taxes on uncertain wage and nonwage incomes. Our two-stage fixed-effects generalized method-of-moments approach first estimates intratemporal and then intertemporal preferences. Specification testing demonstrates the value of incorporating joint progressive taxation of labor and nonlabor incomes. Results for prime-age men emphasize the roles played by hourly wage endogeneity, worker-specific effects, the measure of the rate of pay, and intertemporal budget constraint nonseparability. Simulations indicate that recent tax reforms, while not self-financing, stimulated male labor supplied by about 3 percent and reduced deadweight loss by about 16 percent.
Original language | English |
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Pages (from-to) | 326-359 |
Number of pages | 34 |
Journal | Journal of Political Economy |
Volume | 107 |
Issue number | 2 |
DOIs | |
State | Published - Apr 1999 |
ASJC Scopus subject areas
- Economics and Econometrics