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The Poverty Trap and the Laffer Curve--What Can the GHS Tell Us?

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  • Minford, Patrick
  • Ashton, Paul

Abstract

Budget constraints are drawn up for annual hours and net pay, typically composed of two linear segments: 'benefit-constrained', where extra work forfeits benefit and 'normal', where extra work is subject to the standard marginal tax rate. There are additional linear segments for those on upper tax rates. By ordering males according to the ratio of their maximum net earning power to that when totally unemployed, we establish the appropriate cut-off point for the poverty trap and upper rate segments, from which we estimate labor supply responses to slope and intercept variables. The results suggest high substitution elasticities for those who experienced unemployment during the previous year and those on higher incomes; for average employed men the elasticity was quite l.
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  • Minford, Patrick & Ashton, Paul, 1991. "The Poverty Trap and the Laffer Curve--What Can the GHS Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 43(2), pages 245-279, April.
    • Handle: RePEc:oup:oxecpp:v:43:y:1991:i:2:p:245-79
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    Cited by:

    1. Sanyal, Amal & Gang, Ira N & Goswami, Omkar, 2000. "Corruption, Tax Evasion and the Laffer Curve," Public Choice, Springer, vol. 105(1-2), pages 61-78, October.
    2. Charles Bean & James Symons, 1989. "Ten Years of Mrs. T," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 13-72, National Bureau of Economic Research, Inc.
    3. Semjén, András, 1996. "A pénzbeli jóléti támogatások ösztönzési hatásai [Incentive effects of social monetary benefits]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 841-862.
    4. Patrick Minford & Yue Gai & David Meenagh, 2022. "North and South: A Regional Model of the UK," Open Economies Review, Springer, vol. 33(3), pages 565-616, July.
    5. Dessing, Maryke, 2004. "Implications for minimum-wage policies of an S-shaped labor-supply curve," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 543-568, April.

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