Estimating life cycle labor supply tax effects

James P. Ziliak, Thomas J. Kniesner

Research output: Contribution to journalArticlepeer-review

53 Scopus citations

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 languageEnglish
Pages (from-to)326-359
Number of pages34
JournalJournal of Political Economy
Volume107
Issue number2
DOIs
StatePublished - Apr 1999

ASJC Scopus subject areas

  • Economics and Econometrics

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