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Labour Supply, Search and Taxes

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  • Alan Manning

Abstract

Classical labour supply theory is one of the most sophisticated parts of labour economics. Yet, there is no compelling theoretical reason to believe in an outcome on a classical labour supply curve and it is unclear whether it is a good empirical description of the way in which labour markets actually work. This paper uses the techniques of search theory to analyse the impact of changes in the tax system on incentives to work when individuals do not have flexibility of hours within jobs. It is shown how the traditional comparative statics are of some use but are rarely the whole story and some comparative statics results are surprising. For example, it is shown how a revenue-neutral increase in marginal tax rates will increase incentives to work.

Suggested Citation

  • Alan Manning, 2000. "Labour Supply, Search and Taxes," CEP Discussion Papers dp0449, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0449
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    References listed on IDEAS

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    Cited by:

    1. John Pencavel, 2016. "Whose Preferences Are Revealed In Hours Of Work?," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 9-24, January.
    2. El Badaoui, Eliane & Strobl, Eric & Walsh, Frank, 2010. "The formal sector wage premium and firm size," Journal of Development Economics, Elsevier, vol. 91(1), pages 37-47, January.
    3. Alok Kumar, 2008. "Capital Tax, Minimum Wage, and Labor Market Outcomes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 133-154, January.
    4. Schlüter, Teresa, 2013. "Real wages, amenities and the adjustment of working hours across regional labour markets," LSE Research Online Documents on Economics 58529, London School of Economics and Political Science, LSE Library.
    5. Shapiro, Joel, 2004. "Income taxation in a frictional labor market," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 465-479, March.
    6. Teresa Schlüter, 2013. "Real Wages, Amenities and the Adjustment of Working Hours Across Regional Labour Markets," SERC Discussion Papers 0130, Centre for Economic Performance, LSE.
    7. Gentry, William M. & Hubbard, R. Glenn, 2004. "The effects of progressive income taxation on job turnover," Journal of Public Economics, Elsevier, vol. 88(11), pages 2301-2322, September.

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    More about this item

    Keywords

    Labour supply; taxes; search;
    All these keywords.

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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