乔纳森·格鲁伯-财政学（第五版）gruber_5e_lecture_slides_ch21.pptxVIP

Copyright ? 2010 Worth Publishers 21Heather Luea and Dan SacksP R E P A R E D B Y21.1 Taxation and Labor Supply—Theory21.2 Taxation and Labor Supply—Evidence21.3 Tax Policy to Promote Labor Supply: The Earned Income Tax Credit21.4 The Tax Treatment of Child Care and Its Impact on Labor Supply21.5 ConclusionTaxes on Labor Supply 21IntroductionBetween 1987 and 1988, Iceland overhauled its tax system. During the transition to this new system, workers paid taxes on their 1986 income in 1987, and paid taxes on their 1988 income in 1988. Their 1987 income thus was never taxed!Did this radical change in the tax burden actually affect workers’ decisions about how many hours to work? Bianchi, Gudmundsson, and Zoega et al (2001) investigated this issue by examining the response of Icelandic workers to this one-year “tax holiday,” and they found large effects on labor supply and economic growth. 21Iceland’s Tax OverhaulOverall employment spiked in 1987 from 78% to 85%. 21IntroductionOn average, each 1% rise in after-tax wages led workers to work 0.4% more weeks than they had previously.Real GDP also leapt from an annual growth rate of 4.3% to 8.5%. The effects were, however, transitory. By 1988, these figures had dropped back to levels comparable to the pre-tax-reform levels.This striking response to a change in tax policy shows that taxes can have effects on important decisions, such as how much to work. 21.1The theoretical framework for assessing how income taxes affect labor supply is the same as that used to model the effect of cash welfare on labor supply.Ava trades off consumption (which requires work) against leisure.Each hour of leisure costs Ava her wage, $12.50, in foregone consumption, so the slope of her budget constraint is ?12.5.A 30% tax rate alters this trade-off. The slope of Ava’s budget constraint is now the after-tax wage, ?8.75.Basic Theory ConsumptionLeisure hours0Indifference curve, IC1ABC1BC2900C1 = $13,750C2 = $9,625slope = ?12.50slope = ?8.75Bas